Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

COVENT GARDEN MARKET

Second Reading deferred till Tuesday next.

Oral Answers to Questions — HOSPITALS

Christchurch Hospital

Mr. Cordle: asked the Minister of Health if he will instruct the Wessex Regional Hospital Board to reconsider its proposals regarding Christchurch Hospital.

The Minister of Health (Mr. Kenneth Robinson): The Board intends to consider its proposals again at the conclusion of the local consultations at present being carried out by the Bournemouth and East Dorset Hospital Management Committee.

Mr. Cordle: Is the Minister aware that there are 19 acres of land available—[Interruption.]

Mr. Speaker: Order. We cannot have Question Time against a background of conversation.

Mr. Cordle: Is the Minister aware that there are 19 acres of land available for the development of the hospital, and in a rapidly expanding area a better hospital service is needed for this district, not the reverse as now proposed by the Wessex Regional Hospital Board?

Mr. Robinson: The Board will not decide whether it wishes to give effect to the proposals until the outcome of the consultations is known. If it then con

cludes that there should be a material change in the use of the hospital, it will refer its scheme to me.

South-West Metropolitan Hospital Board (Chairman)

Mr. Boyd-Carpenter: asked the Minister of Health why he has appointed a new Chairman of the South-West Metropolitan Hospital Board.

Mr. K. Robinson: To fill the vacancy arising on 1st July, 1968, from the intended resignation of the present chairman.

Mr. Boyd-Carpenter: Will the Minister ask the new chairman to reconsider his predecessor's policy of closing much-loved smaller hospitals?

Mr. Robinson: No, Sir. I do not think that that could be represented as the policy of the outgoing chairman. It is the Government's policy to close small hospitals which are redundant as new and better facilities are provided. As I have said many times in the House, no small hospital is closed without my personal approval.

Sir A. V. Harvey: Is the Minister aware that in the case of the Congleton War Memorial Hospital we have been kept on a string for years? Now we are told that the Macclesfield hospital will be built some time in the 1970s. Why cannot the right hon. Gentleman be more definite?

Mr. Robinson: If the hon. Gentleman would like to put down a Question—

Mr. Speaker: Order. We are on the subject of the South-West Metropolitan Hospital Board.

Mr. Dean: Will the Minister bear in mind the advantage of the small hospitals in maintaining close links with the G.P.s and the local community?

Mr. Robinson: Where that obtains, it is always a factor that is taken into account.

Shelton Hospital, Shrewsbury (Inquiry)

Sir J. Langford-Holt: asked the Minister of Health whether he will make a further statement on the fire which took


place at Shelton Hospital, Shrewsbury, and his future plans for the hospital.

Mr. K. Robinson: I have decided to set up art inquiry under Section 70 of the National Health Service Act, 1946, into the circumstances leading to this tragedy. The names of the persons to be appointed to hold the inquiry and the precise terms of reference will be announced as soon as possible. The Regional Hospital Board intends to restore the burnt-out ward and to continue its policy of generally improving the buildings.

Sir J. Langford-Holt: Can the right hon. Gentleman give some indication of how long this inquiry will take and when we shall hear the results?

Mr. Robinson: No, Sir, I cannot do so at the moment. I shall ask the inquiry, when set up, to conduct the investigations with due expedition.

Mr. Maurice Macmillan: Will the results of the inquiry be published? A number of recent inquiries have been private to the Ministry, and dealt with by statement.

Mr. Robinson: The results of this inquiry will be made public. Indeed, the inquiry will be held in public, although whoever conducts it will have discretion to take evidence in private in certain circumstances.

Hospital Services (Expenditure)

Sir J. Langford-Holt: asked the Minister of Health what percentage of the National Health Service expenditure is taken by the Hospital Service; how this compares with past years; and what percentages he expects in future years.

Mr. K. Robinson: About 60 per cent. in 1966–67 and in each of the previous five years. No significant variation is expected for the next few years.

"Sans Everything" (Inquiry)

Mr. Maurice Macmillan: asked the Minister of Health when the official inquiry which was started after the publication of "Sans Everything" is expected to be completed; and whether he will publish a full report.

Mr. K. Robinson: Committees of inquiry have been appointed by the hospital boards concerned; the inquiries are at various stages of progress, and I cannot yet say when they will be completed. The findings and recommendations will be published.

Mr. Macmillan: May I ask the Minister to expedite this as fast as possible? There have been various reports in the Press recently, and I am sure that we are all concerned that any disquiet still existing should be allayed as quickly as can be.

Mr. Robinson: One committee has submitted a report to the Board which appointed it, but has not yet summarised its findings and recommendations. No other reports have yet been received.

Mr. Whitaker: Could my right hon. Friend say whether the request for legal assistance by the witnesses at one of the inquiries, details of which have been sent to him, has now been granted?

Mr. Robinson: I am not quite sure of the answer but this is a matter for the chairman of the inquiry concerned.

Ear, Nose and Throat Operations (Waiting Lists)

Mr. Dean: asked the Minister of Health whether he will give an estimate, to the latest possible date, of the number of adults and children, respectively, who are waiting for ear, nose and throat operations, indicating the average delay in each of the regional board areas.

The Parliamentary Secretary to the Ministry of Health (Mr. Julian Snow): Waiting list statistics do not distinguish between patients awaiting admission to hospital for operative and non-operative treatment nor show waiting time for admission for ear, nose and throat operations except those for tonsils and adenoids. I will, with permission, circulate the available information in the OFFICIAL REPORT.

Mr. Dean: Does the Parliamentary Secretary realise the disturbing situation that waiting lists for E.N.T., particularly for children, are tending to grow longer again? What is he doing to remedy this situation?

Mr. Snow: Urgent cases are admitted without delay. We also have to take


account of the fact that this type of operation for adenoids and tonsils is a matter of some controversy—[Interruption.]

Mr. Speaker: Order. Back to Questions.

Waiting List Ear, Nose and Throat on 3ht December,
1966



Region
Tonsils and Adenoids
Other
Total
Median waiting time in weeks for tonsils and adenoids operations
1965


All Regions
…
…
…
80,726
39,040
119,766
14·3


Newcastle
…
…
…
2,316
1,529
3,845
9·5


Leeds
…
…
…
6,148
2,800
8,948
18·6


Sheffield
…
…
…
7,407
3,747
11,154
17·0


East Anglian
…
…
…
1,886
730
2,616
13·1


North-West Metropolitan
…
…
…
7,674
3,515
11,189
12·4


North-East Metropolitan
…
…
…
5,233
2,430
7,663
13·1


South-East Metropolitan
…
…
…
5,278
2,671
7,949
12·2


South-West Metropolitan
…
…
…
4,756
2,287
7,043
14·3


Oxford
…
…
…
2,915
1,894
4,809
16·8


South Western
…
…
…
5,450
2,071
7,521
16·7


Welsh
…
…
…
4,399
2,291
6,690
13·1


Birmingham
…
…
…
10,021
4,398
14,419
15·7


Manchester
…
…
…
11,710
5,532
17,242
18·2


Liverpool
…
…
…
3,528
2,194
5,722
15·2


Wessex
…
…
…
2,005
951
2,956
11·4

National Temperance Hospital (Private Patients)

Mr. Iremonger: asked the Minister of Health why the National Temperance Hospital has been deprived of pay beds for private patients; how many patients have been accommodated in these beds over the past year; and what alternative arrangements are being made for surgical consultants' cases in this hospital in future.

Mr. Worsley: asked the Minister of Health why he has closed down all the private beds in the National Temperance Hospital; and how much notice was given of the closure.

Mr. K. Robinson: The National Temperance Hospital will shortly be transferred to the board of governors of University College Hospital where there is a private patients wing of 111 beds, to which consultants at the National Temperance Hospital may admit their private patients.
In 1967, 169 patients were treated in the six pay beds at the National Temperance Hospital.
My approval of the regional hospital board's proposal to de-designate these beds was conveyed to the board on 18th October. From 2nd January the hospital accepted no further private bookings but

Mr. Snow: This type of operation is the source of some controversy within the profession.

Following are the figures:

patients who had already booked continued to be admitted.

Mr. Iremonger: Can the Minister say whether the new beds which are available will be equal in number to the beds which have been taken away, or will surgeons have to sacrifice the interests of their patients to the new dispensation?

Mr. Robinson: It may be that the hon. Gentleman had difficulty in hearing my original Answer. There are 111 beds in the University College private wing as against the six which have been closed at the National Temperance.

Mr. Worsley: Nevertheless, will the Minister not agree that the closure is contrary to the advice of the medical staff of the hospital? Will he not reconsider it?

Mr. Robinson: I am assured that, when formulating the proposal that these beds should be redesignated, account was taken of the views of the hospital management committee, and that the medical committees and the group medical advisory committee were consulted.

Geriatric Wards (Young and Middle Aged Patients)

Mr. Fortescue: asked the Minister of Health what steps he is taking to improve the present position in which


many young and middle aged invalids live permanently in geriatric wards.

Mr. K. Robinson: I am considering what advice might be given to hospital authorities on the care of younger chronic sick patients.

Mr. Fortescue: Would not the Minister agree that possibly the best way of assisting in this difficult situation would be to give every encouragement to the development of home-care facilities for geriatric patients?

Mr. Robinson: The survey of the younger chronic sick in hospitals which we carried out last year showed that the number in geriatric wards was less than had previously been estimated. Of the 4,223 younger chronic sick in-patients, only 74 of those between the ages of 16 and 34 were in geriatric wards.

Dr. David Kerr: Will my right hon. Friend bear in mind that there is also an argument which says that older people in geriatric wards are helped considerably by the presence of younger, more active and alert patients? Will he do all that he can to improve the lot of all people who have the misfortune to be incarcerated in this way?

Mr. Robinson: I understand that the arguments are not all in one direction.

Mr. Dean: Does not the Minister agree that home services for all these people would be more economic and better for them in most cases?

Mr. Robinson: This depends entirely on the condition of the patient.

Hospitals (Grading)

Mr. John Page: asked the Minister of Health whether he will consider revising the present pattern of hospital provision so that hospitals are graded according to the degree of care provided, so that patients are sent to the hospital best suited to their medical needs.

Mr. Snow: The level and type of facilities provided at existing hospitals are well known to doctors and I have no reason to believe that formal grading of hospitals would enable patients to be treated at hospitals better suited to their medical needs.

Mr. Page: Many members of the medical profession will be very disap

pointed with that Answer. Is the hon. Gentleman aware that there is a great consciousness in the medical world that there are a few cases which are being kept waiting because other patients who only need general nursing care are using beds in hospitals which would be more suitable to deal with the first type of case?

Mr. Snow: Transfers of patients between hospitals are an established feature of the hospital service; for example, if diagnosis shows that treatment is better given at a specialist centre. But the whole concept of the district general hospital is to provide a comprehensive service with adequate consultant cover.

Mr. Maurice Macmillan: The hon. Gentleman refers to the district general hospitals. Will he bear in mind the need for low-dependency care as well as for high-dependency care and, particularly, the point that beds should not be occupied by patients whose sole reason for being in hospital is to undergo diagnostic tests and who could well be accommodated in, say, a hostel?

Mr. Snow: I think that the hon. Gentleman's supplementary question pinpoints the difficulty. Diagnostic tests are not always a simple matter and may need sophisticated equipment which is not readily available other than in hospitals such as district general hospitals.

Hospitals (Industrialised Building Methods)

Mrs. Knight: asked the Minister of Health what plans he has to hold discussions with the building industry with a view to making greater use of industrialised building methods in connection with hospital building.

Mr. Snow: Industrialised building methods are being employed to an ever increasing extent in the hospital building programme, and the industry has been consulted at all stages since the methods were introduced in 1963. I see no need to initiate fresh discussions.

Patients (Discharge from Hospital)

Mrs. Knight: asked the Minister of Health whether he is satisfied that adequate steps are taken by hospitals to


ensure that before patients are discharged follow-up treatment is available for them through the local authority services.

Mr. Snow: Hospital authorities have been advised of the action to be taken before patients are discharged and I have no evidence to suggest that this advice is not being generally acted upon.

Mrs. Knight: Is the hon. Gentleman aware that there are persistent examples of patients, particularly geriatric patients, going home without adequate local authority care? Will he look into the position?

Mr. Snow: In normal practice, it is a standing instruction that 48 hours' notice is given to local authorities when such cases as those which she mentions are discharged from hospital. She mentioned that there are many examples. If she has a particular case in mind, I should like to examine it.

Mr. Dean: Will the Minister look particularly at the recent report of the National Council for the Care of Old People, which suggests that there are many gaps?

Mr. Snow: Yes.

Harrow Chest Clinic

Mr. John Page: asked the Minister of Health what are his proposals for the short and long-term accommodation of the Harrow Chest Clinic, in view of the present uncertainty about the future now experienced by patients and staff alike.

Mr. Snow: The regional hospital board will make proposals to my right hon. Friend when these are necessary.

Mr. Page: Is the Minister aware that the chest clinic at Harrow has been under notice to move for a long period and that the staff and patients are very worried about the future? Will he make a statement as soon as possible?

Mr. Snow: I agree that such anxiety is undesirable. The trouble is that the Regional Hospital Board is awaiting information about the date when the site will be required. I should also mention that in 1960 the Standing Tuberculosis Advisory Committee recommended that chest clinics should be brought within the ambit of a general hospital.

Medway Towns (Accident Emergency Service)

Mr. Burden: asked the Minister of Health how many hospitals in the Medway towns possess the full medical services that comprise a fully staffed custom-designed accident and emergency department.

Mr. Snow: St. Bartholomew's Hospital, Rochester, is staffed and equipped to provide a full accident and emergency service for these towns.

Mr. Burden: Can the hon. Gentleman tell me whether the Medway Hospital is so staffed, because this has been designated as an accident hospital?

Mr. Snow: The designation of the Medway Hospital has been cleared now and the department involved is under construction. It is assumed that it will be completed about the end of 1969.

Mr. John Wells: Is the Minister aware that this situation is completely unsatisfactory as there are two major motorways between Maidstone and the Medway towns and the proposed new general hospital on the Preston Hall site seems to have been put off indefinitely? Will the Minister bring that project forward quickly?

Mr. Snow: The hon. Gentleman must remember that if it is true that accidents on motorways tend to be rather more serious because of speed considerations, it is all the more important to have up-to-date full consultant cover and accident provision available.

Loughborough General Hospital (Nigel Hayward)

Mr. Cronin: asked t?e Minister of Health if he is yet in a position to make a statement on the circumstances under which a small child, Nigel Hayward, who subsequently died, when taken by his mother to Loughborough General Hospital, suffering from acute poisoning last September, was given neither treatment nor first aid but referred to his doctor.

Mr. K. Robinson: The Sheffield Regional Hospital Board has not yet completed its consideration of the Report of the Committee of Inquiry into this case.

Mr. Cronin: Is my right hon. Friend aware that there will be grave dissatisfaction among the people of Loughborough in view of the tragic circumstances in this case, which arose as far back as September? As in any case there is widespread dissatisfaction about the casualty service of this hospital, does not this add fuel to the flames?

Mr. Robinson: It is important that this report should be carefully considered by the Regional Hospital Board. It is hoped that it will be considered by the Board's General Purposes Committee on 25th March and that a statement will be issued after the next full meeting of the Regional Hospital Board on 8th April.

Oral Answers to Questions — MINISTRY OF HEALTH

Prescription Charges

Mr. Eadie: asked the Minister of Health (1) if an employee in receipt of an industrial pension for pneumoconiosis will be covered by prescription charges;
(2) what consultations he has had with trade unions about industrial diseases and the effect of prescription charges; and if he will make a statement.

Mr. K. Robinson: I would refer my hon. Friend to the statement by my right hon. Friend the Prime Minister on 16th January and my reply to the hon. Member for Newbury (Mr. Astor) on 13th February. My consultations to date have been with the professions who will be concerned in the operation of the scheme.—[Vol. 756, c. 1587; Vol. 758, c. 298.]

Mr. Eadie: Is my right hon. Friend aware that there are many pneumoconiotics—and I am thinking about miners—who continue to keep working despite their infliction, and that sometimes they can continue to work only because they have medicinal treatment?

Mr. Robinson: I am aware of these matters, and I can assure my hon. Friend that the problem of the chronic sick is under active discussion at present.

Mr. Dean: Where people suffer from industrial diseases require very frequent prescriptions, is it the intention that they shall be exempt from the charges?

Mr. Robinson: I ask the hon. Gentleman to await a further statement, which

I shall make as soon as possible, on the whole matter.

Mr. Maurice Macmillan: asked the Minister of Health whether he will now give a list of the categories of persons exempt from prescription charges.

Mr. Dean: asked the Minister of Health whether he will now state the categories of people who will be exempt from prescription charges.

Mr. Fortescue: asked the Minister of Health whether he will now announce the categories of people who will be exempt from prescription charges.

Mr. Grieve: asked the Minister of Health whether he has yet formulated his proposals for exempting special categories of the population from the prescription charge; and if he will make a statement.

Mr. Hunt: asked the Minister of Health whether he has yet decided the categories of people to be exempted from prescription charges.

Mr. K. Robinson: I cannot at present add to the statement by my right hon. Friend the Prime Minister on 16th January and my reply to my hon. Friend the Member for Willesden, West (Mr. Pavitt) on 29th February.—[Vol. 756, c. 1587; Vol. 759, c. 416.]

Mr. Macmillan: Can the Minister say whether there is any truth in the story that the actual method used to identify those who are exempted will mean a considerable delay and that we cannot hope to see the exemption arrangements finalised much before the autumn?

Mr. Robinson: No, Sir. I would rather not go into details at this moment, because my revised proposals are being considered by the professions this week. It is, I repeat, my earnest hope that we shall bring in the charges and the exemptions simultaneously.

Mr. Dean: Can the Minister give a clear and categorical assurance that the chronic sick will not have to pay prescription charges?

Mr. Robinson: I have already referred to the original statement of my right hon. Friend, and I hope to make a further statement very shortly on this point.

Mr. Fortescue: Can the Minister assure the House that the permanently disabled will receive exemptions for drugs needed for their condition?

Mr. Robinson: I would have to ask the hon. Gentleman to await my further statement.

Mr. Grieve: Will the Minister, in devising whatever system of exemptions he has in mind, see that it puts as little administrative burden as possible upon the medical practitioners, who are already under considerable burdens?

Mr. Robinson: That has been one of my intentions from the start.

Mr. Hunt: Does not the Minister's reply, and the continuing delay in this matter, indicate that there has been a total lack of any preparation and planning by the Government for this?

Mr. Robinson: No, Sir. It would have been unusual to make contingency arrangements for exemption from prescription charges before the decision to reintroduce them was taken.

Mr. Pavitt: Since doctors are persistently refusing to have any categories at all, and as one doctor on the negotiating committee has refused to accept anyone on his list other than the chronic sick, and one doctor wants to emigrate, will my right hon. Friend reconsider the whole question and come back to the House with something more considered?

Mr. Robinson: I cannot accept the premise of my hon. Friend's supplementary question. The answer to the last part of it is "No, Sir".

Dr. Winstanley: Can the Minister tell the House what he has in mind for defining the elderly in this connection? In fixing the age, would he bear in mind that the earning capacity of women declines at an earlier age that that of men, and that many women, although not themselves elderly, are frequently financially dependent on elderly men? In other words, will he introduce a differential?

Mr. Robinson: Exemptions for the elderly are from the age of 65, as was announced originally by my right hon. Friend the Prime Minister.

Dr. John Dunwoody: Will my right hon. Friend review this rather harsh decision? Does he not think it illogical that women pensioners between 60 and 65 should have to pay prescription charges? Will he look at this again so that all pensioners, men or women, who are in receipt of the old-age pension, are treated in the same way.

Mr. Robinson: The total number of exemptions now envisaged will represent about 50 per cent. of all prescriptions. I do not think that it would be reasonable to extend the category still further.

Mr. Woodburn: Is my right hon. Friend aware that all this trouble has arisen from a four-year campaign by hon. and right hon. Gentlemen opposite to make the National Health Service a symbol of national waste?

Pharmaceutical Products (Government-owned Factories)

Mr. Milne: asked the Minister of Health if he will introduce legislation to set up Government-owned factories, preferably in development districts, for the manufacture of drugs, pharmaceuticals and other commodities required by the National Health Service.

Mr. K. Robinson: No, Sir.

Mr. Milne: Is my right hon. Friend aware that that is a very disappointing reply? Will he look more closely into the matter, as pharmaceutical costs will loom very large in our prices policy in the near future?

Mr. Robinson: Of course, I am concerned to get pharmaceutical products for the National Health Service at the most economical price, but the Sainsbury Committee examined the question of nationalisation and State participation in its Report and did not recommend nationalisation. It expressed doubt whether participation in a lesser form was called for.

Mr. Maurice Macmillan: When considering Questions from his hon. Friends, would the Minister bear in mind the pharmaceutical industry's export record? Since 1948, it has increased its exports about five times and they are now running at a net export figure of about £75 million. Will he balance that against any question of costs?

Mr. Robinson: If I were ever in any danger of forgetting the export record of the pharmaceutical industry, I could rely on hon. Members opposite, many of whom have interests in the industry, to remind me of it.

Ambulances

Mr. Gibson-Watt: asked the Minister of Health to what extent local authority ambulances are used for conveying patients to regional hopsitals outside the boundaries of the local authorities concerned.

Mr. Snow: Statistics about this are not available, but most ambulance authorities have arrangements with their neighbours for mutual assistance in emergencies.

Mr. Gibson-Watt: That is very much what I feared. Can the hon. Gentleman say what steps the Ministry intends to take in order to arrive at an equitable arrangement for all ratepayers who are affected by this scheme?

Mr. Snow: Surely the interest of the patients rather than that of the ratepayers is the most serious consideration here. If the hon. Gentleman has in mind particular cases about which he is concerned, perhaps he will let me have the details.

Mr. Maurice Macmillan: Has the hon. Gentleman any information on the extent to which ambulances are used when all that is required is a conveyance for the patient and not necessarily an ambulance?

Mr. Snow: No, Sir—not without notice.

Mr. Gibson-Watt: asked the Minister of Health what action he proposes to take on the recommendation of the Working Party on Ambulance Training Equipment, Part 2, concerning the colour of ambulances.

Mr. Snow: My right hon. Friend has obtained the views of interested bodies on the Report as a whole, and he is discussing with the local authority associations how far its recommendations should be implemented.

Mr. Gibson-Watt: I thank the hon. Gentleman for that reply. The Report recommended that, eventually, all ambulances should be painted white or cream. In the interests of public safety, will the

hon. Gentleman give some intimation of the Ministry's policy.

Mr. Snow: My right hon. Friend is considering this recommendation and I cannot commit him at the moment. Broadly speaking, the hon. Gentleman is right. Recalling the words of Henry Ford, the conclusion was that it did not matter what colour it was as long as it was white.

Fluoridation (Central Council for Health Education)

Mr. John Hall: asked the Minister of Health what grants the Central Council for Health Education receive either from his Department or from local authorities; and whether part of the work carried out by this Central Council is concerned with providing a fluoridation information service.

Mr. Snow: The Central Council is financed mainly by local authorities and does not receive any grant from my Department. I understand that it provides information on fluoridation.

Mr. Hall: Would not the hon. Gentleman agree that it is loading the dice a little unfairly that those who are against the addition of fluoride to water should be forced to contribute through the rates to the cost of propaganda on behalf of fluoridation?

Mr. Snow: It is largely a matter of the right information, and surely even those who are prejudiced in the matter have a right to receive enlightened information.

Mr. Rankin: Does not my hon. Friend regard it as most important to warn people about the dangers of sodium fluoride in view of the fact that it is used in other places to poison rats?

Mr. Snow: My Department is advised that there is no such danger and that in certain quarters very beneficial results can be obtained by the fluoridation.

Health Education Council

Dr. David Kerr: asked the Minister of Health what advice he has received from the Health Education Council; and what action he is taking to implement that advice.

Mr. K. Robinson: None, Sir. It will be for the new Council, as the central


executive body for the organisation of health education, to implement its own proposals, when it has had time to formulate them.

Dr. Kerr: Does not my right hon. Friend agree that it is a disgracefully long time since the Cohen Committee's Report on Health Education, which recommended the establishment of this? Is it not time that the confusion which still exists in health education was clarified?

Mr. Robinson: The Council has been meeting only since the beginning of the year. I expect it before long to take over the health education promotional work of my Department and the Central Council for Health Education. It will need some little time to review everything that is being done and to plan a programme of work.

Mr. Speaker: Order. I must ask the House to be more quiet. It is difficult to pursue Question Time against multifarious conversations.

Mr. Peter Mills: asked the Minister of Health what steps the Health Education Council have taken to publicise the knowledge and correct methods of survival especially to those in hazardous occupations who may have to deal with exposure at any moment.

Mr. Snow: The Council has hardly had time to start any health education projects yet and I cannot forecast its priorities.

Mr. Mills: In view of the recent tragedies on Dartmoor and off Iceland, is it not rather disgraceful that the Minister has not done something more to publicise these new advanced techniques to save lives? Will the hon. Gentleman immediately take steps to do so so that these accidents may not happen in future?

Mr. Snow: The safety of Servicemen and seamen are within the responsibilities of my right hon. Friends the Defence Secretary and the President of the Board of Trade. The aspect of public interest in these matters will be considered as soon as possible by the Council.

Mentally Handicapped Children, Kent (Clinics)

Mr. Costain: asked the Minister of Health what consultations his Department has had with Kent County Council

on the setting up of nursery clinics for mentally-handicapped children under five years of age; and if he will make a statement.

Mr. Snow: My Department has corresponded with Kent County Council on the provision of training centre places for mentally handicapped children under five. Many local health authorities make such provision and I am advised that it is good practice to do so.

Mr. Costain: Is the hon. Gentleman going to make any recommendation or give any advice on this matter? Does not he realise that this is as essential in Kent as in other areas?

Mr. Snow: The Kent County Council has been reluctant to offer places for children under five within this category and it is accepted by my Department that the proper education and care for these children is best provided in training centres.

Mr. Crouch: Will the hon. Gentleman bear in mind that it is not only the children themselves who require help but also their parents? While there is certainly a need for help for these young children themselves, the parents also need the greatest possible help.

Mr. Snow: I absolutely agree with what the hon. Gentleman has said.

Venereal Diseases

Dr. David Kerr: asked the Minister of Health what steps he is taking to meet the growing incidence of venereal disease, particularly among younger people.

Mr. K. Robinson: Steps are being taken to improve the tracing of contacts as the most effective way of controlling venereal diseases and also to prepare health education material suitable for use in schools.

Dr. Kerr: What consultation is my right hon. Friend having with the Secretary of State for Education and Science in order to ensure that publications are not the only means of bringing home to young people the dangers of venereal disease and venereal contact?

Mr. Robinson: There is a working party on which the Department of Education and Science is represented and it


is considering material for instruction in schools. Work is in hand on the preparation of a film strip and a pamphlet for use by teachers.

Mr. Scott-Hopkins: What has been the increase in this disease over the last four or five years?

Mr. Robinson: There has been a worldwide increase but the rise has been less marked in England and Wales than in many other countries. It still gives rise to concern, however. If the hon. Gentleman will put down a Question, I can give him the figures.

Mr. Grieve: asked the Minister of Health what plans he has to meet the need for new clinics in view of the great increase in venereal disease in the last few years.

Mr. Snow: It is for hospital boards to keep under review the adequacy of their services, but I have no reason to think that overall there is a need for more clinics.

Mr. Grieve: Does the hon. Gentleman appreciate that the country is worried about the increasing amount of venereal disease which is resistant to antibiotic drugs? Will he keep the position carefully under review?

Mr. Snow: Yes, Sir.

Children Below School Age (Nurseries)

Mr. Cronin: asked the Minister of Health what is his policy with regard to the provision of more nurseries for children below school age.

Mr. K. Robinson: That they should be provided, as resources permit, primarily for those who need care on health and welfare grounds.

Mr. Cronin: Does my right hon. Friend realise that there is a large number of able-bodied women who would be happy to look after children, and is he further aware that there is also a large number of women who would be prepared to do productive work of an industrial nature? Could his Department take steps to bring these two together?

Mr. Robinson: Ever since 1945 it has been the policy on day nurseries that the proper place for a child under two

is at home with its mother, and that any provision for children between two and five should be by way of nursery schools, in classes where the hours are shorter. Local authority day nurseries are not, therefore, provided for children of mothers who want to work but do not have to.

Sir T. Beamish: Is the Minister aware of the splendid work being done on a voluntary basis by pre-school play groups? Would it not be possible for the Government and local authorities to give more encouragement to the work of these voluntary bodies?

Mr. Robinson: This matter has been discussed a great deal during proceedings in this House, and in Committee on the Health Services and Public Health Bill.

Miss Joan Lestor: Would my right hon. Friend not agree, bearing in mind that the reduction in the number of day nursery places has not been accompanied by a rise in the provision of nursery schools, and since he has, by something which we all welcome, curtailed the conditions under which people may go in for child-minding, that it is all the more urgent for him to "up" the number of day nursery places available if there is to be any effect at all on social policy?

Mr. Robinson: My hon. Friend will be glad to know that at the end of 1966 there were 445 local authority day nurseries with something over 21,000 places. The authorities' ten-year plans envisage a further 5,000 places by 1976.

Family Planning Service

Mr. Brooks: asked the Minister of Health (1) what advice he proposes to give to regional hospital boards regarding the provision of birth control information in maternity departments;
(2) what steps he is taking to ensure that those women granted abortions under the National Health Service are put in touch with the local authority health services responsible for the provision of contraceptive advice.

Mr. K. Robinson: I have asked all hospital authorities to co-operate with local authorities in the introduction of a comprehensive family planning service in all areas.

Mr. Brooks: I thank my right hon. Friend for that reply. Would he not agree that, even at a time of financial stringency, it is better to be safe than sorry and that prevention is cheaper than cure? Will he ensure that there is the maximum liaison possible between the various branches of the National Health Service dealing with birth control to see that there is not a grossly heavy burden placed upon gynaecological services in hospitals?

Mr. Robinson: Yes, Sir.

Sir D. Renton: While welcoming the Minister's original Answer, may I ask where responsibility will lie in this cooperation between the Ministry of Health and the local authorities?

Mr. Robinson: Responsibility for cooperation depends on both parties to the co-operation. I have asked local authorities to report by the end of this month on the action that they have taken or propose to secure comprehensive family planning services.

Dr. John Dunwoody: I welcome my right hon. Friend's announcement, but could he assure the House that these services will be equally available to women who use the domiciliary maternity services?

Mr. Robinson: I would hope so.

Dr. Winstanley: In addition to taking these welcome steps, will the Minister publicise the fact that the pill is freely available on a National Health Service prescription to those persons for whom the control of conception is a matter of medical necessity?

Mr. Robinson: I thought that that was generally known, but I will consider whether further publicity is desirable.

Holidays Abroad (Medical Treatment)

Mr. Ridsdale: asked the Minister of Health what steps he is taking to ensure that when people go on holiday abroad they know they are not covered by National Insurance.

Mr. Snow: I assume that the hon. Member is referring to medical treatment under the National Health Service.
The leaflet which is issued with every passport explains that the National Health Service is not available outside this country and advises people travelling abroad to take out private insurance against the risk of being taken ill while abroad. Publicity is also given to this from time to time in the Press, on the radio and on television. Leaflets about obtaining medical treatment abroad are freely available and are sent to the principal travel agencies and motoring organisations. I welcome this additional opportunity to give further publicity to the situation.

Mr. Ridsdale: How many satisfactory agreements for medical assistance exist with other countries, and what is being done to improve these arrangements?

Mr. Snow: Agreements exist with Denmark, Norway, Sweden, Yugoslavia, and New Zealand. Negotiations are being carried out with two Eastern European countries. The fundamental problem is that very few other countries have comparable health services to the extent to which we offer them, and the difficulty is that of obtaining reciprocity on the basis of equity.

Invalid Car (Mr. G. W. Smith)

Mr. Ridsdale: asked the Minister of Health why he refuses to allow Mr. G. W. Smith, of 2 Bards Cottages, Oakley Road, Dovercourt, an invalid car, though he needs this car for his employment, and is willing to contribute as much as he is able to the cost of such a car.

Mr. Snow: Because his disability does not make him eligible for an invalid vehicle.

Mr. Ridsdale: Is the hon. Gentleman aware that this man is willing to contribute £200 towards the car and that, without it, he will be a charge on the unemployment fund? Will he look seriously at the case again?

Mr. Snow: My information is that the hon. Gentleman's constituent can walk reasonable distances and does not at present have a difficult journey to work. If there is any deterioration in his condition, we should like to look at the case again.

Mallaby Committee (Recommendations)

Mr. Crouch: asked the Minister of Health what plans he has to implement the recommendations of the Mallaby Committee which reported in December, 1966.

Mr. Snow: My right hon. Friend has considered in consultation with the local authority associations the suggestions addressed to the Department in the report and appropriate action is in train.

Mr. Crouch: Does not the Minister consider that well over a year is a long time to make the local authorities competitive in the recruitment of medical officers of health?

Mr. Snow: Only one group of suggestions has been received by my Department. The observations of the local authority associations on these suggestions have now been obtained and we are working out, with the appropriate Whitley Council and other organisations, the appropriate measures to be taken. I agree that it is a very complex report and needs careful treatment.

Medical Computing

Mr. Crouch: asked the Minister of Health what plans he has to implement a national plan for medical computing.

Mr. Hunt: asked the Minister of Health what discussions he has had or proposes to have with the computer industry regarding the use of computers both in the medical field and for the purpose of improving the general administration of the National Health Service.

Mr. K. Robinson: My officials are continually discussing with computer manufacturers the use of computers for all National Health Service purposes. Our aim is to encourage the orderly development of medical computing on a national basis.

Mr. Crouch: Can the Minister say whether the use of computers will be looked al with some urgency in the interests of efficiency in the administrative side of hospital management?

Mr. Robinson: Yes, Sir. I think there are great advantages to be obtained, and a computer policy and development

branch was formed in the Ministry in July, 1966.

Mr. Hunt: Can the Minister give any indication of the financial savings which are likely to materialise from the wider use of computers within the Health Service?

Mr. Robinson: No. I think that question is in far too general terms for me to be able to answer.

Mr. Maxwell: Will my right hon. Friend consider setting up a committee to study how computers might be used to disseminate the results of research and development to assist the medical profession to obtain the latest advances in science and technology which may be useful in healing patients and saving expense in the hospital service?

Mr. Robinson: Yes. I can assure my hon. Friend that all aspects of medical computing are currently under study in the National Health Service and in my Department.

Oral Answers to Questions — TRANSPORT BILL

Mr. G. Campbell: asked the Prime Minister (1) if he will convene a conference on productivity to consider the effects on trade and industry of the Transport Bill;
(2) what representations he has received about the Transport Bill from trade and industry, local authorities and other public bodies, transport operators and export organisations; and what replies he has sent.

The Prime Minister (Mr. Harold Wilson): As to a special conference, no, Sir. As to representations, the greater part of those I have received have been of a uniform character by firms in the road transport industry. As such representations are properly matters for my right hon. Friend the Minister of Transport I have normally asked her to deal with them on my behalf.

Mr. Campbell: In the very serious situation in which the Government find themselves economically today, why does the Prime Minister not make a simple but effective contribution to help the Chancellor on Budget day either by dropping the whole Bill or the controversial parts of it?

The Prime Minister: I think that this matter has been and is being very fully debated in Committee. [HON. MEMBERS: "No. It has been guillotined."] Since the National Economic Development Council has estimated that at worst there will be an average increase of 0·2 per cent. on industrial costs—less than a halfpenny in the £ on prices to consumers—and since the Bill is designed to reduce the deficit on British Railways, which falls on the Exchequer, I hope that the hon. Gentleman, after full consideration, will feel able to support the Bill.

Mr. Manuel: Is the Prime Minister aware of the many communications received by hon. Members on this side in support of the Bill—[HON. MEMBERS: "No."]—regarding the provisions for rebate on fuel tax, the new bus grants, the rural bus grants, the reduction in drivers' hours and the retention of socially necessary lines? If hon. Members opposite are opposing these concessions they ought to make this clear when speaking at their meetings throughout the country.

The Prime Minister: Yes, I am aware of those representations. Of course, these will increase with growing understanding of the Bill and less dependence by certain sections of the public on propaganda dished out to them by right hon. and hon. Gentlemen opposite.

Mr. Grimond: Is the Prime Minister aware that in respect of some areas special considerations about certain sections of the Bill arise which are quite different from the general objection made by the road haulage industry? In areas such as the Highlands of Scotland, where transport is extremely important and freight rates are high, the extra charges under the Bill will be a disaster to the industry and to agriculture. Will the right hon. Gentleman look into these problems and see whether, to some extent, those services can be relieved from the higher charges under the Bill?

The Prime Minister: I know that this point has been substantially made. It is a matter for debate and I must leave it to my right hon. Friend, who is well aware of the problems.

Mr. Swain: I agree that the Transport Bill is a very good Bill, but may I ask my right hon. Friend whether, in the event of him changing his mind in future

about a conference, he will invite the miners of this country to give the Government and industry a lesson on production, seeing that their production figures have gone up by 11 per cent. in six months?

Mr. Speaker: Order. Questions must be related to the original Question.

The Prime Minister: My hon. Friend will be aware that I recently met representatives of the Executive of the National Union of Mineworkers when these figures were quoted. Certainly if productivity in many other industries had risen anything like it has in the coal industry and other publicly-owned industries, my right hon. Friend would be facing a very different situation this afternoon.

Mr. Maudling: The Prime Minister referred to the growing understanding of the Transport Bill. Will he say what contribution is made to that growing understanding by curtailing Parliamentary discussion of it?

The Prime Minister: I thought that Parliamentary discussion on the proposal to curtail Parliamentary discussion was itself pretty full last week, and I do not think that I can add very much in answer to a question to the substantial arguments advanced by my right hon. Friend last week.

Mr. Thorpe: In fairness to the Prime Minister, may I ask whether he is aware that he is right to reject the idea of a conference for trade and industry, since they are already fully aware that nine-tenths of the Bill will have a disastrous effect on the economy? As the Government are apparently the only people left who are in ignorance of the economic disaster which the Bill will bring about, will the Prime Minister address himself to that question?

The Prime Minister: Since I accept neither of the two premises on which the last few words of the question are based, and since the Government have explained, and will continue to explain, the growing public appreciation of the benefits of the Bill, I do not think that I can accept what the right hon. Gentleman said.

Mr. Bob Brown: Is my right hon. Friend aware that Clause 152 of the


Transport Bill embodies a Private Member's Bill which I moved to provide travel concessions for old people? Is he aware that the passing of this Clause will make available to thousands of old-age pensioners travel concessions of which they have been deprived for many years by the party opposite?

The Prime Minister: Yes, Sir. Many of the old-age pensioners are in my constituency, for which reason I repeatedly joined others of my hon. Friends when we were on the benches opposite in presenting a Bill to deal with this scandal, but every Friday, with great regularity, year after year it was blocked by the party opposite when it formed the Government, and my predecessor as Prime Minister specifically refused to introduce any Government Bill on this question.

Oral Answers to Questions — COMMONWEALTH PRIME MINISTERS' MEETING

Mr. John Fraser: asked the Prime Minister whether he will seek to call a conference of Commonwealth Prime Ministers to discuss migration within the Commonwealth.

The Prime Minister: I would refer the hon. Member to the Answer I gave on 7th March to a supplementary question by the right hon. Gentleman the Member for Bexley (Mr. Heath).—[Vol. 760, c. 645–6.]

Mr. Fraser: Does my right hon. Friend recognise that in that supplementary answer he said that he was considering the matter, and will he now make a decision about it? Secondly, may I ask whether he regards the offer by the Government of Saskatchewan to accept more migrants to that part of the Commonwealth as a useful point for starting discussions on this sort of matter?

The Prime Minister: On the second part of that question, this is an extremely useful and constructive proposal. On the first part of it, the agenda for the forth-coming Commonwealth Conference will have to be agreed by all the Commonwealth Prime Ministers concerned. I shall be very surprised if this does not form part, and a very important part, of our discussions.

Mr. John Hall: Does the Prime Minister agree that the problem of migration within the Commonwealth is not one which we as a country can solve alone? Will he make absolutely certain that it is discussed at the Commonwealth Conference, and that some attempt is made to persuade other Commonwealth countries to help in solving this problem?

The Prime Minister: The answer to the first part of the question is "Yes". As I have said, I am sure that this will be discussed at the Conference, subject to the agreement of my Commonwealth colleagues.

Mr. Lipton: Will my right hon. Friend bear in mind that the solution of the migration problem cannot, as hitherto, be left to the limited resources of local authorities directly concerned, or to hon. Members in whose constituencies there are large immigrant populations?

The Prime Minister: My hon. Friend will be aware of the considerable help given increasingly over the past few years for local authorities to be able to cope with all the very serious problems of housing, education or other aspects of assimilation caused by the immigration problem.

Sir D. Renton: When the right hon. Gentleman is discussing migration with other Commonwealth countries, will he remember to tell their representatives that the United Kingdom is more densely populated than any of those countries which send large numbers of immigrants here?

The Prime Minister: I think that that is well understood by a number of my Commonwealth colleagues, and in case there is any lack of that I shall consider sending them the illuminating booklet recently produced by the right hon. and learned Gentleman.

Oral Answers to Questions — SCOTLAND (NATIONAL UNION OF MINEWORKERS' RESOLUTION)

Mr. Hector Hughes: asked the Prime Minister what study he has made of the recent resolution of the Scottish area of the National Union of Mineworkers requesting the Government to introduce legislation to establish a Parliament in


Scotland, a copy of which has been sent to him; and what reply he has sent.

The Prime Minister: So far as I can trace, Sir, no copy has been sent to me, but if my hon. and learned Friend would care to let me have any copy he has I would be happy to study it.

Mr. Hughes: Does my right hon. Friend realise that the mineworkers are not the only industrial workers in Scotland who deplore the lack of opportunity to take advantage of devaluation by increasing industries and increasing exports, and will he take the necessary steps to see that they have a chance to do this?

The Prime Minister: I am not sure that this arises out of my hon. and learned Friend's question, but he will be aware of the improving situation over the past few months so far as development area advance is concerned in Scotland. He will be aware of the great contribution made in this direction by decisions in this Parliament and of the United Kingdom Government as a whole.

Mrs. Ewing: Will the right hon. Gentleman accept an invitation from the Scottish National Party to tour Scotland to see for himself that this resolution of the Scottish area of the N.U.M. is in line with the strongest evidence that the people of Scotland are determined to have self-government now?

The Prime Minister: I shall be in Scotland on Saturday, though not at the invitation of the party which the hon. Lady represents.

Mr. James Hamilton: Will my right hon. Friend recognise that the opinion contained in the letter from the N.U.M. is not the expression of opinion of the majority of trade unionists in Scotland, and is not the majority opinion of the people in Scotland? Will he appreciate that before he replies to the letter, when he receives it?

The Prime Minister: Not having seen the missive, because my hon. and learned Friend did not send it to me, it is difficult to comment on it, but I shall take into full account what my hon. Friend has said.

Mr. David Steel: Will the Prime Minister recognise that the area resolution

of the N.U.M. is one more piece of evidence that there is a growing demand for a Parliament in Scotland? If he is not willing to recognise that, will he at least say that the Government Whips will not be applied to the Federal Bill introduced by my right hon. Friend the Member for Devon, North (Mr. Thorpe) when it comes up for Second Reading?

The Prime Minister: I think that we discussed this in rather more depth at Question Time two or three weeks ago. I have nothing to add to what I said on the subject on that occasion.

Mr. Eadie: Speaking as a miners' M.P., may I ask my right hon. Friend whether he is aware that the Scottish area of the N.U.M. does not advocate the separation of Scotland from the United Kingdom? Is he further aware that miners everywhere believe in, and espouse the cause of, internationalism, and not nationalism?

The Prime Minister: I thank my hon. Friend for what he has said. When this document finally reaches me I shall study it in the light of all the advice that I have been given this afternoon on how I should read it.

Mr. Edward M. Taylor: Will the Prime Minister consider resolving this question by holding a referendum and allowing the people of Scotland to decide for themselves?

The Prime Minister: I do not think that that would be the proper way to deal with this question, but I have nothing to add to what I said when we last discussed this matter at Question Time two or three weeks ago.

Oral Answers to Questions — VIETNAM

Mr. Molloy: asked the Prime Minister if he will now consider sponsoring a meeting between the President of the United States of America, the Prime Minister of the Union of Soviet Socialist Republics and U Thant to consider ending the war in Vietnam.

The Prime Minister: I would refer my hon. Friend to the Answer I gave to a supplementary question by him on 12th March.—[Vol. 760, c. 1181–2.]

Mr. Molloy: I was hoping that my right hon. Friend would have reconsidered that reply. As he has said that this war will not be resolved by a military adventure, may I ask whether he thinks that, as this is a cancer which can affect all mankind, the steps for which I am asking are fully justified to try to end this war?

The Prime Minister: I have said that this war will not be solved by an imposed military solution, and the same thought found its way into the communiqué issued in Moscow when I was there. I have discussed this very fully with Mr. Kosygin, with President Johnson, and with others, and I have kept in close touch with both the Soviet Union and the United States Governments since I left those two countries.

Mr. Blaker: Is it not significant that the Question does not propose that the conference should be attended by the Prime Minister himself?

The Prime Minister: I do not know what satisfaction the hon. Gentleman gets out of that question. I have no doubt that he gets a great deal out of it. I know that we have our responsibility as co-Chairman in this matter. We have not hesitated throughout the period of this fighting, and particularly since the bombing of the North began, to press our fellow co-Chairman to take the lead in calling a conference. We understand their reasons for not doing this. We have therefore sought a number of other means in direct discussions with the Heads of Governments to get the parties to the conference table.

Mrs. Renée Short: But now that the people of this country are being asked to bear considerable economic burdens to bolster up the dollar, does my right hon. Friend not think that it is time that we had a quid pro quo, and that he now asked the United States President to get out of Vietnam and to stop the enormous waste of American resources on this frightful war?

The Prime Minister: My hon. Friend's question is something of an oversimplification of the worldwide financial and monetary storm which was the subject of the discussions in Washington this weekend. Nor would it be right to say that we were bolstering the dollar.

What all of us and our representatives in Washington were trying to do last Saturday and Sunday was to bring some common sense and reason into the situation which had been created by the gold speculators, so that we could have some stability of monetary values and a chance for the extension of world trade.

Mr. Eldon Griffiths: Reverting to the Question on the Order Paper, would the right hon. Gentleman not agree that the President and the Soviet Prime Minister have ample contacts without his sponsorship? Will he also confirm that the resignation of the right hon. Member for Belper (Mr. George Brown) does not involve any change in his policy of generally supporting the United States in Vietnam?

The Prime Minister: On the first part of that Question, there have, of course, been direct talks between President Johnson and Prime Minister Kosygin last June in the United States, but both sides have been very anxious to discuss with me and with the British Government what we can do to help secure that the parties concerned go to the conference table. Therefore, the first part of the Question is wrong. In view of the line consistently taken by my right hon. Friend the Foreign Secretary on these matters, which is well within the recollection of the House, I do not think that the second part needs an answer.

FOOT-AND-MOUTH DISEASE

Mr. Biffen: (by Private Notice) asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the oubreak of foot-and-mouth disease confirmed at Northwood near Wem.

The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart): Although my veterinary inquiries are not entirely completed, it seems probable that the outbreak at Northwood reported yesterday is a case of recrudescence of disease. A Press Notice, issued by my Ministry on 28th February, drew attention to the possibility that the disease could reappear on farms which have had the disease and been restocked. Particulars were given of the measures being taken to reduce this risk. It was made clear that it cannot be entirely eliminated.

Mr. Biffen: At this point, can the right hon. Gentleman confirm that the virus is O1, and similar to that identified in the consignment of lamb which is circumstantially believed to have caused the initial outbreak?

Mr. Peart: The virus in the outbreak is type O, but we have not yet identified a sub-type.

Sir J. Langford-Holt: Can the right hon. Gentleman confirm or deny a report of a further outbreak in Minsterley in Shropshire, which is not, I understand, a reinfection but is at a place nearly half a mile from the previous infection?

Mr. Peart: There was a suspected case. The first results were negative, but we continued testing for safety.

Mr. Ensor: Can my right hon. Friend say exactly what the situation was with regard to outbreaks of foot-and-mouth immediately prior to October, 1964, and what the previous Government did with regard to the imports of pig meat?

Mr. Peart: That is another matter. A recrudescence of the disease is quite common.

Mr. Thorpe: In view of this news, has the right hon. Gentleman given reconsideration to his policy of allowing imports?

Mr. Peart: That is entirely another matter.

Dr. John Dunwoody: Would my right hon. Friend agree that, nevertheless, there is still anxiety about meat imports? Would he look into the question of the experimental work which has been done abroad on irradiation of meat, which seems to suggest that this is a technique which can kill foot-and-mouth virus in meat without damaging or changing the meat in any way? If this technique could be applied, we could possibly import meat from all over the world, with no risk at all to British agriculture.

Mr. Peart: My hon. Friend must appreciate that that is a much wider question. I have previously answered these points. I am dealing now specifically with this outbreak, and I am still waiting for my Veterinary Service's advice.

Mr. Godber: But does not the right hon. Gentleman accept that this new outbreak re-emphasises the seriousness of the whole problem? Will he not accept that there is widespread feeling that he should not have readmitted this meat? Would he further explain why he did not tell us last week that he was already releasing this meat from cold store?

Mr. Peart: The right hon. Gentleman knows that that is entirely another question. The House made a decision on this. We are now dealing with something which is being investigated. I believe that all the evidence so far shows that this is a recrudescence of the disease. I hope that he will wait until I have had final veterinary inquiries before being so dogmatic.

Mr. Godber: rose—

Mr. Hazell: I am sure that all hon. Members would wish to express sympathy with those now affected by this new outbreak, but would my right hon. Friend agree that this is not a primary outbreak and, therefore, not attributable to any action which he has decided upon regarding imports of meat from South America?

Mr. Peart: That is why I am suggesting that all hon. Members should await the final results of our testing. I have said that it has been typed O. It may well be sub-typed, and may confirm what he says, but it would be better to await the report.

Mr. Godber: Would the right hon. Gentleman now answer the second part of my question?

Mr. Peart: The right hon. Gentleman is persisting in asking questions which he puts to me from time to time and to which I have continually given him answers.

Mr. J. T. Price: Although everyone in the House and the country understands and appreciates the natural anxieties of the farming community faced with this news, would it not be a great pity if someone, through sheer political motives, continued to indulge in political gamesmanship and used this issue in spite of the tremendous devotion of the people in the public service and elsewhere who


have helped to put down the major epidemic?

Mr. Peart: Yes, Sir.

Mr. Grant-Ferris: Would the right hon. Gentleman realise that farmers in the affected district gladly accept the restrictions which his veterinary officers must put upon them, but that they are at a loss to understand why he will not accept the restrictions which his officers want to put on him?

Mr. Peart: I answered the hon. Member in a previous debate. He is completely wrong on this.

NATIONAL INSURANCE ACT 1965 (AMENDMENT)

3.38 p.m.

Mr. Gwilym Roberts: I beg to move,
That leave be given to bring in a Bill to amend the National Insurance Act 1965 by reducing the pensionable age for men to sixty.
I am well aware that the bulk of the audience is not here to listen to me. In consideration of this and the fact that the Chancellor is shortly to follow, I shall be extremely brief, but I believe that there is a case, before we consider short-term financial measures, for considering important matters which will remain long after the speculators and their activities are forgotten.
The Bill is simple. It provides for the option of pensions at 60 instead of 65. This does not mean—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman has undertaken to be brief; noise will extend his speech.

Mr. Roberts: This does not mean that any man would have to retire at 60. He would merely get this option.
I will state, without developing them, the three arguments for the Bill. The first is the argument for sex equality. Women receive pensions at 60, and sex equality is a two-way process. After all, actuarially a woman of 60 has a life expectancy of about four years greater than that of a man. The second argument is that of technological change. Whatever may be the short-term factors, the Labour Party was elected to power in 1966 as a party of technological revolution, and it is an inherent part of that process that people's working lives should be made shorter so that their time for recreation and pleasure may be greater. The third argument is a humanitarian one in that hundreds of thousands of people are forced to go on working into their sixties, when they are really incapable of doing so, simply because they have no pension provision.
The Bill is backed by many major blue and white collar unions. The only argument that could possibly be developed against it is that of cost. I venture to suggest, even as we face the Budget of 1968, that while we can spend £2,000 million a year on armaments, we can afford anything. I will not delay the House by developing my case for the Bill. I will only add that, as we wait to hear the Budget, I am not in the least sorry for having delayed the House for a few moments in Human Rights Year to initiate a very humanitarian Measure.

Question put and agreed to.

Bill ordered to be brought in by Mr. Gwilym Roberts.

NATIONAL INSURANCE ACT (1965) AMENDMENT

Bill to amend the National Insurance Act 1965 by reducing the pensionable age for men to sixty, presented accordingly, and read the First Time; to be read a Second Time upon Friday, 10th May, and to be printed. [Bill 107.]

Orders of the Day — WAYS AND MEANS

BUDGET STATEMENT

Mr. Speaker: Before I call Mr. Chancellor of the Exchequer, it may for the convenience of hon. Members if I remind them of the procedure which the Leader of the House suggested last Thursday night might be followed at the end of the Budget speech, and refer briefly to the subsequent proceedings, particularly as this is a new occasion. At the end of the Chancellor's speech, copies of the Budget Resolutions will not be handed round in the Chamber as has been the practice in recent years, but they will be available to hon. Members in the Vote Office.
Under the new procedure, the first Resolution will be one to apply the provisions of the Provisional Collection of Taxes Act, 1968, to certain of the proposals to be contained in the subsequent Resolutions. Under Standing Order No. 90(1), the Chair is required to put the Question on this Resolution forthwith.
When the first Resolution has been disposed of, the Chair will propose the Question on the second Resolution. This, I understand, will be the general Resolution entitled "Amendment of the Law", which, under the former procedure, was always printed as the last Resolution, and on this Resolution the Budget debate will take place today, and on the remaining days allotted to it.
Finally, when that Resolution has been agreed to next Monday evening, it will be my duty, under Standing Order No. 90(2), to put successively the Questions on each of the remaining Budget Resolutions without Amendment or debate, but with the possibility of a Division in each case.

I. INTRODUCTION

The Chancellor of the Exchequer (Mr. Roy Jenkins): This Budget is remarkable in only too many respects. It is my first, which in any circumstances would make it a memorable and intimidating occasion for the Chancellor of the Exchequer—even if for no one else. It would in any event have been a major Budget, neces

sary to deal with the massive consequences of devaluation. And it is now being presented in the wake of a weekend of world monetary upheaval, which necessarily affects the framework even if not the substance of the proposals.
On top of all that, it is the first occasion that you, Mr. Speaker, or any of your predecessors, has been present at an annual Budget statement. It is indeed, I believe, the first occasion that taxation proposals have been initiated in the whole House since 7th May, 1641. One of my few pleasant duties this afternoon, Mr. Speaker, is to welcome you to our proceedings.
The other major change in procedure this year is that we shall be taking the Committee stage of the Finance Bill upstairs rather than on the Floor of the House. I do not expect that this will mean any reduction in the time which the Bill is in Committee or in the thoroughness with which its provisions are discussed. But taking the main Committee stage upstairs will enable us to get through without submerging the other business of the House during the late spring.
Traditionally the Budget speech provides the Chancellor with an opportunity to review the economic situation over recent months, to discuss the prospects for the coming months, and so to set his main proposals in their broad economic context. The Budget this year is dominated not only by the decision to devalue last November, but also by the events of the last few days, the weekend conference of central bankers in Washington, and the strains in the world monetary system which reached a climax at the end of last week.
I reported to the House yesterday on the outcome of the talks in Washington, and I shall be saying something later in this speech about the present international monetary situation. But I want to make one initial point to the House. Although the position which developed at the end of last week was menacing, it was not basically a crisis arising from the position of sterling. It was much wider than that: a crisis of the international monetary system, which had to be dealt with—as it was—by co-ordinated international action, not by savage cuts in the living standards of our people—or indeed of the people of any other country


—going beyond anything that the underlying situation requires.
This Budget is concerned with the structural changes in the pattern of economic demand and activity that are required to enable us to take full advantage of devaluation and establish a substantial and continuing balance of payments surplus. The measures which I am announcing are those which I should have been announcing in any case, as being necessary—and sufficient—for this purpose. If they are, as I believe, necessary for re-establishing our prosperity at home and our viability in the world, they are also an important and necessary contribution—the best contribution we can make at this time—to the stabilisation of the international monetary situation.
These measures are in themselves severe. In the short term, as I told the House on 17th January, we must have a stiff Budget followed by two years of hard slog. I believe the British people understand this analysis, and that they are ready to make the necessary sacrifices so long as they are told the facts about our economic situation and are provided with the opportunities which will enable us to achieve a securely based prosperity. The purpose of this Budget is to present the facts, to impose the sacrifices, and to provide the opportunities. Later in this speech I shall describe the way in which I have approached this task and the strategy which has shaped the selection of measures which I shall be asking the House to endorse. But first I must set out the facts which determine our economic condition. At present the balance of payments and our external position continue to be our major preoccupation, and it is with this subject that I start my economic survey.

II. EXTERNAL POSITION

I turn now to the way in which I see our external position developing. My assessment is based on the assumption that, following the Washington conference and. the measures I shall be announcing later in my speech, exchange markets will quieten down over the coming weeks. The Washington Conference not only relieves us of our immediate anxieties, but provides a good foundation for further new developments in the international monetary system. In his state

ment after the recent Washington meeting, the Managing Director of the International Monetary Fund has emphasised the importance of bringing the scheme for special drawing rights into force with the least possible delay. This in itself will mark a major advance in the working of the international monetary system. Its adoption will show that there are ways of achieving an orderly expansion of world liquidity to meet world needs and that we do not therefore have to rely entirely on the old haphazard methods, the disadvantages of which have been amply demonstrated in recent weeks. I look forward to attending a Ministerial meeting of the Group of Ten at Stockholm in 10 days' time and I hope that, as a result of these and subsequent discussions, we shall be in a position to bring in a Bill later on in this session to enable us to play our part in this scheme.
I need not add now to the statement which I made to the House yesterday on the results of the Washington Conference. But I must come back to the point that, though this crisis has not been basically about sterling as such, or about the United Kingdom economy it has once again demonstrated the importance of sterling in the international monetary system. The international use of sterling as a reserve and trading currency, while helping us sometimes, imposes heavy burdens on us at others. These are not burdens we can just shuffle off. We must discharge our obligations. The facilities now available to back sterling show that we have ample resources behind us. In the longer run, however, it must be our objective to ensure that the rôle of sterling in the international monetary system is consistent with our capacity to maintain that rôle. We can make progress only in co-operation with other countries and with international organisations. This takes time, but I must ask those who urge swifter and more dramatic courses upon us to recognise the importance of bringing about changes in a way which will not prejudice the interests of holders of sterling and will strengthen rather than weaken the world monetary system.

My Budget is designed to make a major contribution to the stability and sane development of the international financial system; it will create the conditions at home for a substantial and lasting surplus


in the United Kingdom balance of payments. This task is inescapably ours, and ours alone. Similarly, the United States authorities have shown that they are determined to deal with their own balance of payments problems—which are different in scale and nature from ours. I am confident that both of us will succeed and that by doing so we will give that firmness to the two reserve currencies which is the necessary foundation on which the international trading community must build.

I now come to my detailed assessment of the external position. The inevitability of devaluation last November is shown by the balance of payments figures for the fourth quarter, which show an identified deficit of about £350 million, making the deficit for 1967 as a whole £540 million. Probably more than half of this was due to special factors such as the closure of the Suez Canal and the dock strikes. But there was a continuing underlying deficit, which must be to some extent attributable to a lack of competitive strength. We have not only to eliminate this deficit and pay the cost of devaluation in less favourable terms of trade but also produce a continuing balance of payments surplus large enough to enable us to repay our debts, to rebuild our reserves and give ourselves some margin in hand to tide us over special factors and short-term fluctuations in our future fortunes. This is not just a matter of achieving a surplus this year or next; the task before us is so to reorient the economy as to enable us to achieve as soon as possible and to sustain a balance of payments surplus of the order of £500 million a year.

Prospects for 1968–69: Current Account

How can we expect the balance of payments on current account to develop over the next year? First, provided that the world monetary system holds up, our exports would in any case have been likely to be helped during this year by an expansion of world trade. Devaluation will enable us to make the most of the opportunities presented by this expansion. Reductions in the foreign exchange prices of exports will enable exporters to expand their volume of sales and perhaps break into new markets, and improvements in the profitability of

exports will be an incentive to make and sell more goods for export, and to give betters sales service and thus gain export orders. The benefits of devaluation for our export trade will not happen all at once. The export figures are now including the clearance of cargoes delayed from last year, but cannot be expected to reflect much of the effects of devaluation. During the second half of this year, however, and through the next year the effects should be showing increasingly.

We are looking for large rates of increase. But they are not greater than we need, nor more than we can achieve. Other countries have achieved this sort if increase in their exports. Take the case of Italy: between 1963 and 1965—admittedly a good period for world trade—Italy's exports increased in volume at an annual rate of nearly 20 per cent., and she turned a current account deficit of 700 million dollars in 1963 to a current account surplus of 2,000 million dollars in 1965: a turnround of nearly 3,000 million dollars in two years. This was achieved without a change in the exchange rate. Our devaluation presents us with a greater opportunity to achieve similar results.

Now, Mr. Speaker, devaluation also means higher import prices in sterling terms. By itself this will tend to increase the import bill, as we have seen from the January and February trade figures. But the price rise relative to home production should encourage import substitution, offsetting the rise in the volume of imports that would normally have accompanied rising demand and output; this should lead to a much reduced growth of imports in the coming months.

Devaluation should also benefit our invisible earnings. Many of them arise in currencies which have not been devalued, and their sterling value is therefore greater. In some cases our debits will also cost more, but the effects of the Middle East situation on our oil costs should be much less adverse than in the second half of last year. On balance, therefore, the invisible account should gain. I have a small positive contribution to make here: the Finance Bill will include amendments to the exchange control provisions to remove a technical obstacle to the development of a market in sterling certificates of deposit,


which should be a useful addition to the range of services provided by the London banking system.

Prospects for 1968–69: the Capital Account

Turning now to the capital account, we must dearly maintain in effect the measures we have taken to minimise the burden of outward investment on our balance of payments. The purpose of these measures has been not to bring overseas investment to a halt, but rather to make the overseas investment which continues more selective and in the process to reduce to a minimum the burden which it places on our reserves. Thus, we have made it a point of policy to secure that as much direct investment overseas as possible is financed by borrowing abroad. The result of our measures and of substantial inward investment has been that last year there was a surplus on our private long-term capital account.

On 30th January I announced a small change in Exchange Control rules for direct investment outside the Sterling Area, whereby exporters are now allowed to buy foreign exchange within limits at the official rate for export-promoting projects expected to bring benefits to the United Kingdom balance of payments provided that within eighteen months these benefits will equal or exceed the total cost of the investment and continue thereafter. This was a limited change for the specific purpose of promoting export sales; we are not yet in a position where there can be any more general relaxation of our controls over overseas investment, whether direct or portfolio.
Nor has the time yet come to relax the Voluntary Programme, which restricts direct investment financed from the United Kingdom in Australia, New Zealand, South Africa and the Irish Republic, and sets a limit to portfolio investment in these countries and outside the Sterling Area by United Kingdom institutions. This programme must continue for a further year, on the same basis as hitherto. This will be a disappointment to some, specially those firms which have already postponed projects in order to conform with the programme. But I am clear that it is necessary in the national interest, and that it should continue on the volun

tary basis which has served so well so far. I believe that I can count in industry's continuing co-operation in this. The Governments of the other countries concerned have been informed of the decision to continue the Voluntary Programme. I record my appreciation of their understanding attitude.
I want also to say something about private portfolio holdings of foreign securities. Since 1965 it has been the policy to transfer to the first-line reserves a proportion of these national overseas assets. This was done by the "25 per cent. scheme", under which a quarter of the foreign currency proceeds of any sale of foreign securities has to be exchanged into sterling at the official rate and is thus brought into the official reserves. This scheme has its disadvantages, and places some inhibition on the active management of portfolios. But in present circumstances we clearly cannot contemplate giving up this useful source of benefit to the reserves, though I should be glad to consider any sensible modification which would diminish this disadvantage, without at the same time diminishing the inflow of foreign currency to the reserves.

Conclusion

To sum up, then, on the external position: we are still in a position of great difficulty, but also of great opportunity. We cannot right the balance or seize the whole advantage of the opportunity all at once. We are still likely to be in deficit in the first half of this year, but on present prospects for world trade and given the restoration of stability to the international monetary situation I certainly hope and expect that we shall be in surplus in the second half. For the future we need, as I have said, to achieve a continuing balance of payments surplus of the order of £500 million a year as soon as we can and to sustain it for as far ahead as we can see, so that we can repay our debts, rebuild our reserves and develop our economy.

III. THE BUDGET JUDGMENT

I turn now, Mr. Speaker, to the general economic prospect and the basis of my Budget judgment.

In 1967 the rate of growth was only about 1 per cent., considerably less than had been expected at the beginning


of the year. The fall of exports through the year, and the low level of stock building, largely counteracted the increase in public investment and private consumption. Unemployment was relatively high throughout the year, though it has tended to fall in recent months. Wages were held in check in the first half of last year, during the period of severe restraint, but in the second half of the year a good many settlements took effect, and over the year as a whole both hourly wage rates and average earnings rose by 6 per cent. while retail prices rose by 2½ per cent. There was thus a rise in real wage rates of well over 3 per cent. It was not a rise which was earned by our national performance.

The rate of growth this year must be left to a large extent to depend on the way in which exports respond to the stimulus of devaluation. Unless that is done we shall invite the defeat of our main purpose, and upon a front where we can afford no more defeats. I have already told the House that I expect a large increase in the value of exports in 1968. I do not want to put a ceiling to that increase. We must be able to seize all the competitive advantages of devaluation as soon as they come through.

For this purpose we must check the growth of public expenditure and private consumption, which were the main expansionary forces last year, and release the resources necessary to sustain as large an increase in exports and industrial investment as possible. The measures announced by my right hon. Friend the Prime Minister on 16th January were designed to slow down the growth of public expenditure over the next two years and we intend to stand firmly by the pattern set out by him on that occasion. This will involve a sharp slowing down compared with recent trends, particularly in the case of public investment. Investment in some nationalised industries—in the electricity industry, for example, where it has been particularly heavy recently—may soon begin to fall. Public investment and public consumption are expected each to increase at a rate of little more than 2 per cent. a year up to mid-1969. Looking further ahead, we shall ensure that the claims of the public sector are compatible with the total resources available as compared with other calls upon them. This will be the central

task of this year's review of public expenditure.
This leaves consumers' expenditure, which accounts for well over half the total of national expenditure. It is determined above all by real income—by the relationship between money incomes and prices. The slower money incomes rise, the better for our competitive position and for our economic prospects. I shall have more to say about this later; it is of fundamental importance in our economic policy. At this stage I need only say that, with prices rising faster than usual on account of devaluation, real incomes are likely to grow more slowly than usual. In this situation there is bound to be some doubt about the behaviour of personal savings. My expectation would be that, if I took no steps in this Budget to restrain consumer demand, consumers' expenditure in real terms would be likely to increase over the period from the second half of 1967 to the middle of 1969 at a rate of about 1 per cent. a year.

A rise in consumption even at this modest rate, coming on top of the other demands on resources for which we must be prepared, is more than we can afford without undue risk. We have to provide for a big turn-round in stockbuilding and a sharp increase in fixed investment, while at the same time leaving ample scope for an improvement in the balance of payments. But these are not items which can ever be forecast with complete precision. I have to reckon with the real possibility that some elements in home demand, whether investment or consumption, will rise more quickly than is forecast. If this happened, or if exports responded more quickly to the stimulus of devaluation, we could perhaps meet the extra demand, but only at the cost of running quickly into inflationary conditions in which the competitive advantage of devaluation would soon be dissipated, and in which the flow of exports would be inhibited. We would be undermining a strong and secure balance of payments position before we had even achieved it. If both consumption and export demand grew faster, the result would be even worse. A growing home demand would fight a running battle with the improving export opportunity, and there is no doubt on past experience that it is home demand which would win. We should therefore have frustrated what must now be the central objective of our


economic policy—the largest and quickest possible turn-round in our balance of payments.

This must be our central objective, Mr. Speaker, both because it is by far the best way in which we can contribute to restoring the stability of the international monetary system, and because it is the key to our ability to pursue a policy of sustained growth. Excessive growth in the short-run before we have secured the balance of payments, would thus be the enemy of steady growth for several years to come. The vital thing this year and next is to put the balance of payments into substantial surplus. This can only be done by sacrificing the normal claims of home demand on our resources. But once this sacrifice has been made and the adjustment has been completed, there will thereafter be no reason why personal consumption, as well as other elements in home demand, should not rise year by year in accordance with the increase in output.

As we should know from painful experience over many years, there is no benefit in a sudden sharp burst of expansion which would quickly use up any margin of slack and recreate all the pressures of inflation. That is not satisfactory growth. Satisfactory growth depends mainly upon improvements in productivity. I very much hope that we can improve on our past productivity trend. But I am not going to count on this before we have achieved it. To do that would be to invite a rapid repetition of our past troubles. I therefore believe that I must budget for a cut-back of about 2 per cent. a year in consumption—a cutback, that is, from the 1 per cent. a year rise which would have been likely without budgetary action. I must warn the House that a cut in consumption of this magnitude requires extremely severe increases in taxation.

The House will wish to know what the economic prospect is after the imposition of this severe cut in consumption. Rather than go into detail and into many figures in this speech I have decided to provide this information in written form. I shall be publishing, in the Financial Statement, economic forecasts for the 18-month period from the second half of 1967 to the first half of 1969 inclusive. These forecasts take account of the measures I shall be announcing later this afternoon.

This is the first time such forecasts have been published, and I hope the House will find them useful in considering the measures I shall be proposing.

I must, however, warn the House that economic forecasting cannot, except by chance, be wholly accurate because forecasts depend in the last analysis on assumptions about future trends and developments, both here and abroad, which all may not share and which events may invalidate. This is indeed a particularly difficult year for forecasting. The shifts as a result of devaluation are so large that their extent is particularly difficult to predict. On top of that there are the present world monetary uncertainties. However, I decided that these were not sufficient reasons for postponing the introduction of what I believe would be a beneficial new practice. The inevitable risk that developments will in some respects—I hope not too many—falsify the forecasts is more than counterbalanced by the great advantages that will stem from a more informed discussion, both inside and outside the House, of our economic situation. If in the process we learn to improve our forecasting techniques as was suggested the other day by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), so much the better.

According to these forecasts we can, after this cut in personal consumption, expect an average rate of growth in the gross domestic product in real terms of at least 3 per cent. a year over the whole 18-month period from the second half of 1967 to the first half of 1969. The faster we export, the faster output will grow and an increase at the rate of 4 per cent. a year is within the range of possibilities. Some hon. Members may want to go faster, but I would remind the House that even the lower rate of growth of about 3 per cent. would be a three-times improvement over what we achieved in 1967, and there will be room for a better export performance to lead us more strongly ahead.

Mr. Speaker, I could on the forecasts have taken a slightly more optimistic view and presented a less hard Budget than I am doing. I make not the slightest apology for not having done so. This is not a year in which to take any risks in that direction. It is a year in which to use devaluation to cure a major structural fault which has bedevilled our


economy for too long past. Compared with our more successful trade competitors we consume too much of our national income, import too much and export too little. Growth in itself will not cure that. Undirected, it might even make it worse. That is why we must make sure that there are effective restraints upon consumption, and that exports and import-savings are given the fullest opportunity to develop. That opportunity, particularly if accompanied by improvements in productivity, could put us on a new trend which could give us far more sustained and secure growth in the future.

Whether we manage to seize the opportunity depends not only on the fiscal policies which I follow in this Budget but also on the restraint which all sections of the community exercise in the demands they make on the expected growth of the national income. This brings me, Sir, to prices and incomes policy.

A firm and effective incomes policy is not a substitute for fiscal action as an instrument of demand management. I have not formulated my proposals on the basis that it could be, though they allow for its effects. Such a policy is, however, of crucial importance in relation to costs and prices. If we are to rid ourselves permanently of our balance of payments troubles we must master the tendency of our economy to generate excessive increases in wages and prices. There are already signs that renewed pressures for inflationary increases are building up. In the course of 1967, as I have said, average earnings per head rose by about 6 per cent., and in the second half of the year the rate of increase was even larger. The underlying increase in productivity was probably no more than 3 per cent. a year. The implications for our costs are obvious. The competitive advantage which we have gained by the change of parity will quickly disappear unless we can hold back pressures for increases in the national wage and salary bill which are unjustified by increases in productivity.

We have considered carefully whether the improvement we need could be obtained by means of a wholly voluntary policy, or by asking the House to legislate simply for continuance of the existing powers, which would otherwise ex

pire in the summer. We have had to conclude that neither of these courses would be adequate in present circumstances and that a much firmer policy for prices, incomes and dividends, backed by extended statutory powers, is essential, at least until the end of next year. On the incomes side its main feature will be a ceiling of 31 per cent. on increases in all the main forms of remuneration, but excluding increases directly related to the amount of work done. All increases must continue to be justified against the existing criteria of Cmnd. 3235. But these increases must be contained within the ceiling, whether settled at national, or local or plant level. The ceiling will be applied as an annual rate; thus, if in a particular case the criteria point to an increase and more than a year has elapsed since the pay of the particular group was last adjusted, the ceiling on any such increase will be correspondingly higher than 3½ per cent., though large increases will still need to be staged. There should continue to be a minimum interval of 12 months between settlements. There will be an exception to the ceiling for productivity agreements—stringently tested—which raise productivity sufficiently to justify a pay increase above 3½ per cent. But all such cases will have to conform to the guidelines set out by the National Board for Prices and Incomes in its Report No. 36.

In the wake of devaluation, some price increases are inevitable; and, as the House knows, a number of nationalised industries, which have held prices stable for some time must now raise their tariffs if they are not to build up increasing deficits—which would inevitably mean unacceptable increases in the total of public expenditure. But we must see that prices do not rise by more than is strictly justifiable, and we shall be seeking an extended power to enable us to defer or suspend increases which cannot be strictly justified.

We intend that this new policy should be applied from now on by all concerned in the determination of prices and incomes, including, of course, the Government themselves. Legislation will be introduced as soon as possible to reinforce the statutory powers available to deal with any breaches of the policy, whether on prices or on incomes. The main feature will be power to defer or suspend increases in wages, salaries or


prices for up to twelve months on reference to the National Board for Prices and Incomes. There will also be proposals for powers to reduce prices and to phase increases in the rents of local authority and private houses. We consider it necessary as part of our overall strategy for the economy to seek legislation covering at least 18 months, with freedom to renew it. My right hon. Friend the Secretary of State for Economic Affairs will be describing the new policy more fully when he speaks on Thursday, and a White Paper will be issued shortly.

The 3½ per cent. ceiling, Mr. Speaker, will apply to dividends. Companies will be required to limit any essential increase to not more than 3½ per cent. of the dividend for the preceding account year, and are asked to make no increase at all without good reason. No company, however, will be required by the operation of this standard to distribute lower dividends than it did two years ago, or possibly earlier in some cases. Statutory powers will be sought to back up this ceiling and prevent breaches of the policy. This scheme for dividend restraint will be more fully described in the 'White Paper and in a Treasury announcement to be issued this evening. It is intended that the scheme should apply to any recommendation for a quoted company's ordinary dividend made after today. In the case of such dividends, companies are asked to notify the Treasury in good time before they commit themselves wherever their intentions would be to increase dividends above the total for the last company year.

I believe that the need for this new phase in the development of prices and incomes and dividend policy will be widely understood. Neither our international competitiveness nor our national standard of living can be securely improved if increases in money incomes are not backed by an increase in real output. Understanding and support are vital for the success of the policy. But this would not be sufficient without statutory powers to deal with any groups—whether in the field of prices or incomes or dividends—who are not prepared to cooperate. The Government have the duty

of giving a firm lead, and we mean to ensure that the ceiling is applied at national, local and plant levels. I cannot sufficiently emphasise that our success in establishing the prospects for growth at home and external viability depends upon achieving a greater degree of restraint on the growth of money incomes. If we are unsuccessful in achieving these objectives, we could well find ourselves confronted with a disastrous impact on the economy and a significant lowering in the standard of living.

It must be recognised, however, that a ceiling of 3½ per cent. on wage increases, strictly applied, will press hard on people of small means, and particularly those with families. We propose to mitigate these consequences by increasing family allowances with effect from 8th October, 1968, by a further 3s. over and above the increase of 7s. which will be paid from 9th April, 1968. We are making arrangements to concentrate this new benefit on those families whose need is greatest. So we shall adjust child dependancy allowances and supplementary benefits, where children also qualify for family allowances, so as to keep the total public provision for those children unchanged, and we shall recover the further increase from those who pay tax, in the same way as the 7s. increase, under arrangements which I shall describe later in this speech.

We propose to meet the net cost of this further increase by a small change in National Insurance benefits, the savings resulting from which will accrue to the National Insurance Funds rather than to the Consolidated Fund. We propose to discontinue the payment for the first three days of sickness, injury or unemployment which is at present made after a period off work has lasted for a fortnight. Legislation will be necessary both for the increase in family allowances and for the change in provisions for sickness, injury and unemployment benefit, and a Bill will be brought before Parliament in the near future. This legislation will give the House an opportunity of considering these proposals in detail. The Government of Northern Ireland will be introducing their own legislation on similar lines.

IV. GOVERNMENT FINANCE: OUTTURN AND PROSPECTS

The Financial Statement

I turn now to the narrower field of Government finance, in order to fulfil my traditional duty to give the House the figures for this year's prospective out-turn and the estimates for the coming year. But first I should remind the House that this year, as a result of the National Loans Act, we are making changes in the conventional Government accounts and the layout of the Financial Statement. These changes are described in more detail in the foreword to the Statement. Although the new accounting arrangements do not come into operation until 1st April, 1968, the figures for 1967–68 in the Financial Statement have been adjusted so as to bring them as far as possible on to the new basis and thus facilitate comparisons between the figures for 1967–68 and the estimates for 1968–69.

1967–68 Provisional Outturn

With the Budget before the end of March, the outturn figures for 1967–68 can be only provisional. The outturn of total revenue in 1967–68 on the new accounting basis is expected to be £11,177 million, that is, £84 million more than the estimate. Total expenditure, at £10,878 million, is £519 million above the original estimate. The bulk of this excess arises in the Supply Services and is the outcome of a number of changes over the year which have already been debated.

The surplus on the Consolidated Fund, that is, the difference between total revenue and total expenditure, is thus expected to be £299 million, a decrease of £435 million on last year's Budget estimate when converted to the new basis. Under the new arrangements this surplus is transferred to the National Loans Fund.

The provisional total for loans from the National Loans Fund is put at £1,748 million. The reduction of £18 million on the Budget estimate is mainly the net result of a shortfall of £135 million in drawings by local authorities from the Public Works Loan Board, offset by additional lending to the nationalised industries.

After taking into account the surplus of £299 million on the Consolidated Fund,

the balance on the National Loans Fund which is met mainly by borrowing is expected to be £1,449 million as against an estimate of £1,032 million.

1968–69 Prospects

Turning now to the prospects for the coming year and again using the new accounting basis, Consolidated Fund revenue from taxation and other receipts is estimated at £11,952 million. This is the estimate on the basis of existing tax rates, and takes no account of the proposals already announced to increase the rate of Corporation Tax to 42½ per cent. or the adjustments of tax allowances to be made in connection with the increases in family allowances. The increase of £775 million over the forecast outturn this year arises mainly on Inland Revenue account, but also allows for the general withdrawal of export rebates from 1st April next.

Total expenditure from the Consolidated Fund is estimated at £11,312 million, an increase of £434 million on the expected outturn this year. This figure includes the gross cost of the 7s. increase in family allowances from 9th April, but not that of the further increase of 3s. to be paid from 8th October. It also includes £31 million for the additional cost of agricultural support next year as a result of the recent Price Review; this figure is not included in the published Estimates of Supply expenditure.

On the basis of existing taxation, the surplus to be transferred to the National Loans Fund next year would thus be £640 million. Outgoings from the Fund next year for loans to nationalised industries, local authorities and other bodies are expected to amount to £1,744 million. In making provision for the loans to nationalised industries, I have taken into account the increase in prices of gas and of Post Office services which were announced yesterday. Details of these loans appear in the National Loans Fund White Paper which is being published today.

Net borrowing for the National Loans Fund next year before taxation changes is therefore estimated at £1,104 million.

Central Government net balance

I should at this point explain to the House that the net borrowing requirement


of the National Loans Fund is not quite the same in definition as the Central Government's borrowing requirement, which was the borrowing requirement referred to in the Letter of Intent which my right hon. Friend the Home Secretary sent to the International Monetary Fund on 23rd November last year. The net borrowing of the National Loans Fund includes drawings upon Departmental balances and net borrowing from Governmental accounts such as the National Insurance Fund. To the extent that the requirements of the National Loans Fund are met by borrowing from those internal funds, the borrowing requirement of the Central Government from non-Governmental sources is diminished; on the other hand, if these funds are recalling balances held with the National Loans Fund, the Central Government's borrowing requirement will be increased. For 1967–68, I expect the borrowing requirement of the Central Government to be about £1,482 million. Next year, if there were no changes in taxation, I would expect it to be about £1,129 million. This figure, I should add, will look very different after my taxation changes.

V. MONETARY POLICY

Before coming to my tax proposals, however, I should deal with one or two points in the field of monetary policy.

First, credit policy, which, as the House knows, is the other main instrument, besides fiscal policy, through which the Government seeks to operate on the level of economic activity. Immediately after devaluation the banks and the finance houses were asked to restrict total advances to the private sector (excluding identified export finance and fixed rate finance for shipbuilding) to their then current level, and within that ceiling to give priority to production and investment likely to benefit the balance of payments. The banks and other institutions responded readily to this call for restraint, and I record my appreciation of this fact. At the same time, I should like to say also how much I appreciated the speed and the flexibility with which the banks and the Stock Exchange adapted their arrangements to the two Bank Holidays last week. The immediate outlook offers no scope for relaxing credit restraint at present. I

must ask the banks, therefore, to continue to observe the ceiling, with the same exclusions and priorities in the direction of lending as at present.

I turn from credit to savings. Additional savings help to reduce the pressure of domestic demand. And, if they take the form of purchases of Government debt by the public, they also help to reduce the Government's dependence upon borrowing from the banking system.

The measures announced on 16th January, in conjunction with those which I shall be announcing later in this speech, will effect a very substantial reduction in the central Government's borrowing requirement. I hope, however, that this will be to some extent offset by additional borrowing to finance an increase in the gold and foreign exchange reserves in the Exchange Equalisation Account. It is one of the paradoxes of our financial system, although one well-known to many members of the House, that an improving reserve position increases the need to borrow at home, while a worsening one diminishes it. It will thus be in no way less important that we should raise as much as possible by sales of gilt-edged securities outside the domestic banking system.

This year also offers a special opportunity in the field of national savings. As the Chairman of the National Savings Committee for England and Wales, Sir Miles Thomas, has pointed out, one straightforward and easy way in which everyone in this country can support the country is by buying National Savings. He gave us the striking illustration that, if every working person in this country were to save Is. a day, this would bring in over £400 million in a year and would go a long way towards solving our economic difficulties—and our taxation problems.

I would like at this point to pay tribute to Sir Miles Thomas and to Lord Birsay, Chairman of the National Savings Committee for Scotland, and to the thousands of voluntary workers of the National Savings Movement who so steadfastly assist the country by their efforts, year in year out, to increase National Savings. I want to help the Movement by making sure that the whole range of National Savings securities are up to date and fully competitive.

I have indeed explored carefully the possibility of unorthodox steps, such as issuing what is sometimes called an index bond, the redemption value of which would be tied to the value of money, or offering certificates on which the interest would be tax free. The obstacle, I fear insurmountable, to the first is that it would be difficult to single out one form of Government security for this special treatment. There would be repercussions upon the whole gilt-edged market, and we might end up with some desirable growth in savings but with the cost of Government borrowing more than proportionately increased. Equally, a tax concession could not be applied only to those who were making genuine new savings. It would, of course, be most valuable to those with heaviest tax liabilities, and much of the issue would inevitably be taken up by those switching out of other securities. Even modest national savers would obviously also switch to the new issue. The loss of revenue would, I fear, be disproportionate to the new savings brought in. I have, therefore, regretfully had to confine myself to more conventional proposals. I am making three changes.

National Savings Certificates

The current issue of National Savings Certificates has been an outstanding success since it was first introduced two years ago, and it continues to offer one of the best returns obtainable in the market. This year, like last, the Certificate has attracted over £60 million net and the total amount invested in National Savings Certificates is now well over £2,000 million. The high sales of the current year suggest that many people must now be reaching the limit of £750 announced in last year's Budget speech and from 22nd March I am therefore raising this to £1,000.

British Savings Bond

I am also introducing a new British Savings Bond. This will replace the present National Development Bond from 1st April. British Savings Bonds will carry a rate of interest of 6 per cent., with a £2 per cent. tax-free bonus if the Bonds are held for their full life of five years. Like the Development Bond, they will be sold in units of £5 and can be cashed at

one month's notice. They will be on sale at all Post Offices, Trustee Savings Banks and Joint Stock Banks. Any one person will be able to buy up to £10,000 of the Bonds. Holders of maturing issues of Defence and Development Bonds will be offered conversion into the new 6 per cent. British Savings Bond.

Premium Savings Bonds

In the case of Premium Savings Bonds, I have decided to increase the size of the prize fund, the number of draws and the number of prizes. Experience has shown that what most people are attracted by is a combination of a few very large and a lot of very small prizes. Bearing this in mind, I have decided to improve the prize structure by introducing a weekly draw of one £25,000 prize in addition to the normal full-scale monthly draws. To finance the rearrangement of prizes and to maintain the present favourable odds I am increasing the rate of interest on which the prize fund is calculated from 4½ per cent. to 4⅝ per cent. I shall seek the powers to make the necessary changes in the Finance Bill, and the new weekly draws will begin on 1st September.

National Lottery

There is another form of revenue-raising which is not saving, but which can voluntarily attract money which might otherwise be spent: a National Lottery. This might well raise in this country, as it does in many others, a sizeable sum of money for public purposes. There is a Private Member's Bill, presented by my hon. Friend the Member for Cleveland (Mr. Tinn), before the House at the present time. This was carried on Second Reading by a large proportionate majority but in a very small total vote. I have no reason to believe that that vote was unrepresentative of opinion in the House, but before Government action were taken I would prefer to see it confirmed on a better attended day. I therefore propose to table an enabling Clause in the Finance Bill, which will no doubt be debated and voted upon at Report stage on the Floor of the House. The Clause, although presented in the Bill for convenience, will not be a normal Government Clause. There will be a completely free vote on this side of the House—even for Ministers—[Laughter.]


—and I hope that there will be an equally free vote on the other side of the House, even for the Opposition Front Bench. If the decision is favourable we will proceed to implement it by means of further legislation. I hope that in these circumstances my hon. Friend will agree to withdraw his Bill, although we would be glad to have his assistance in working out the exact form of the scheme. My own view is that we should go for a high rate of profit, that some of that profit should go into general revenue, and that some should be earmarked for desirable but not essential objects of public expenditure.

I know that some Members of the House and some people in the country will find this idea repugnant. They may carry the day; but if they do not, I do not see why people who think otherwise should be prevented from contributing to the national finances in a way they may find a good deal less painful than some others. I need hardly tell the House, however, that we are not looking to this as a major way out of our difficulties. In the context of this Budget it is a very small item.

VI. TAX CHANGES: INTRODUCTION

I now turn to the methods by which I propose to raise the very large sum of additional taxation which is necessary. I have been exhorted from almost all sides to be bold, and from many to be imaginative as well. By imaginative I think what is primarily meant is that by thinking up new methods of taxation I should avoid the disadvantages associated with existing ones. Initially, with all the enthusiasm of a new Chancellor, I was much attracted by this approach. I looked eagerly at all the canvassed methods of new taxation. I even thought up a few additional ones of my own. But I eventually decided that in a year when I was asking for many sacrifices from many people, one of the sacrifices which I should impose upon myself was the abandonment of a widespread search for novelty. I decided this for three reasons. First, the successful introduction of a new method of taxation requires a great deal of careful preparation. [HON. MEMBERS: "Hear, hear."] The broad economic consequences should be carefully and calmly thought through. [HON.

MEMBERS: "Hear, hear."] I suggest that hon. Members wait before they cheer too loudly. And the collecting Department, whether it be the Inland Revenue, Customs and Excise or another, requires a good deal of time—and a good deal of spare manpower—to work out the administrative details. A year in which the Chancellor takes office only a few months before the Budget, and in which in addition, he thinks it necessary to bring the Budget forward by a few weeks, is not therefore a good year for a major programme of tax innovation.

Second, I have been impressed by the force with which many of those engaged in industrial and commercial planning have asked for a little stability in our taxation system. They would also like stability in tax rates, of course, but that is not compatible with an effective policy of demand management, certainly not in present circumstances. In a year when rates of taxation are bound to go up, there is in my view a good deal to be said for not at the same time making major changes in the basis of taxation. There is a limit to the amount of change which the Revenue Departments, individuals, companies and their professional advisers can reasonably absorb.

Third, I believe it my duty at the present time to view with a very jaundiced eye any new tax that could not be administered without a large additional recruitment of staff. Other things being equal, a tax which is cheap to collect clearly has considerable advantages over one which is not. This is in itself a very powerful reason against any move this year towards a tax on value added. On the merits of a TVA there are arguments on both sides. It would broaden the tax base and help to align our taxation system with those of our European neighbours, although not without a price. It would, however, be an expensive tax to collect, as compared with Purchase Tax, for example, because of the great increase in the numbers of points of collection. It would also call for much more account-keeping and form-filling by industry and commerce. These considerations—apart from others—rule out any change for this year. The subject was of course examined in 1964 by a Committee under the Chairmanship of Mr. Gordon Richardson. The arguments are now being re-examined by a Committee of the


National Economic Development Council, which is expected to report by the autumn.
Another change which has been canvassed involves some form of compulsory savings. This has considerable superficial attraction in a year when demand has to be cut back very severely. Many taxpayers have written to me suggesting that they would be prepared to make a temporary sacrifice of the type that would be here involved. But the objections are very powerful. Any proposal of this kind does, of course, assume a considerable increase in direct taxation, the arguments for and against which I shall discuss later. But far more formidable is the lion—in the shape of the Post-War Credit scheme—which stands in the path. This scheme was introduced 27 years ago by the last Chancellor but 12. None of my 11 intervening predecessors, seven of one party, four of another, operating in a whole range of different economic climates, has felt able to discharge at a rapid rate the liabilities incurred in those war-time years.

It would, I think, be quite wrong for me to undertake the repayment of any new liabilities which might be incurred this year and next in advance of those which have been outstanding for so long. Any form of complusory saving now introduced would therefore have to take its place in the queue for repayment behind the outstanding £230 million of principal of and interest on Post-War Credits. In these circumstances the element of compulsion would be a good deal more to the forefront than that of saving. Tempting though it is for any Chancellor, particularly one placed as I am this year, to pass on liabilities to his successors.

I concluded, regretfully but firmly, that with Post-War Credits in the way, I should not incur further commitments of this sort. If and when the time comes to relax, there will be plenty of opportunity for doing so by straightforward tax remission rather than having to discharge old debt. My job is to raise what has to be raised this year without placing a future burden on the Consolidated Fund.

How is this to be done? The old dilemma between direct and indirect taxation presents itself in a peculiarly

acute form this year. Yet much of the traditional argument is now, to my mind, largely out of date. Indirect taxation, particularly if used in a selective way, is not nearly as regressive as in the old breakfast-table days. Nor is it by any means any longer the case that direct taxation is substantially paid only by the relatively well-to-do. Income tax falls significantly, and is certainly felt to bear heavily, upon those with average and even somewhat below average incomes.

Nor would I wish to ignore three other considerations. First, there is strong evidence for the belief that nearly all sections of the community would rather pay at the point of sale than through deductions from the pay-packet. I cannot ignore that view. At a time when I have to ask for sacrifices, it is right that, in a democratic society, where success depends upon the response and not merely upon the decree, that, compatibly with obtaining the necessary result, and with fairness, the views of those who have to pay should be taken fully into account. Second, indirect taxation, to some extent at any rate, offers the individual a choice. If he is horrified by the impost he can abstain from some part of his consumption and produce the same demand reduction by saving. I certainly should not object to that.

Third, there is the alleged disincentive effect of high direct taxation. There may be more allegation than reality in this. Certainly the Radcliffe Commission failed to uncover any hard evidence to support it. But the mere fact that it is so widely believed is of itself significant, and means that further substantial increases in taxation on earned incomes could well have a stultifying effect upon the development of the economy. And as my central purpose must be to make the economy work more efficiently than it has done for many years past, this consideration must weigh heavily.

Furthermore I cannot ignore the experience of our more successful competitor economies abroad. In general, the total of our public expenditure, and hence the total amount to be raised by taxation, is in no way out of line with theirs. But our direct taxation, on earned incomes is comparatively high. It may, indeed, be too high, but this is certainly not a year, as I think the House and the country will


appreciate, in which I can contemplate reductions.

To be set against all this is the consideration that indirect taxation inevitably has an impact on the Retail Price Index which a direct deduction from the pay packet does not. This has to be faced. But it would be quite unreasonable for people to express their preference for indirect taxation, and then to regard its impact as a greater reason for seeking to offset its effect by income increases than if the pay packet were to be reduced at source by higher direct taxation. My main conclusion is, therefore, that I ought to look for obtaining the bulk of my additional revenue from indirect taxation, but that it should be levied in as selective and non-regressive a way as possible.

I now come to describe my proposals: first, in the field of indirect taxation.

VII. TAX CHANGES: CUSTOMS AND EXCISE

Betting and Gaming

I turn first to the duties on betting. I have approached them with the conviction that the House and the country are ready for considerable increases. My only regret is that the increases I am able to propose are not as great as I would have wished. This is not through any weakening on my part, but because of the need to ensure that a new tax, which has built up well since its introduction in 1966, does not break in our hands and lead to widespread evasion, with all the undesirable social and indeed criminal consequences which that could have, through trying to put too heavy a weight upon it. The experience of my illustrious predecessor in 1928 shows that these are real dangers.

There is also the consideration that while a great volume of money changes hands through betting, much of this is a purely circular movement of funds—the laying-off of bets which small bookmakers have to do extensively if they are to operate prudently is an example of this—and the amount of new money coming in, and still more the amount of money going out into purchasing power, is only a small fraction of the total. In consequence, the present 2½ per cent. duty is roughly equivalent to a 35 per cent. Purchase Tax on a commodity.

I therefore propose a doubling of the duty to 5 per cent., the maximum, I am strongly advised, which the tax could bear at the moment without endangering its whole basis. I also propose to increase the pool betting duty on football pools and fixed odds football coupons betting from 25 to 33½ per cent. of stakes. The changes will in each case apply from Monday next, 25th March.

Gaming Licence Duty

This brings me to the gaming licence duty. It would be premature to undertake any fundamental revision or sweeping increase of this duty while the House is still considering the major changes proposed by the Gaming Bill. At the same time, it would be wrong in the context of the increases in the duties on betting if I were not to ask for some contribution from this form of gambling. I propose, therefore, somewhat to increase the rates of licence duty. The rate for the smallest bingo halls, now £100, will go up to £125, and that for the smallest casinos from £500 to £750. At the other end of the scale, the largest bingo halls will pay £2,000 instead of £1,000 and the largest casinos £75,000 instead of £50,000.

Between these extremes I propose to introduce one new step in the duty scale for bingo halls and two additional steps for casinos. Full details are set out in the Financial Statement. These new rates will be payable on all renewals of existing licences, as well as on new licences taken out after today and expiring after 30th September next. The estimate for the effect of all these changes is an increase in the year of the betting and gaming duties for a full year and in 1968–69 by £30 million.

Alcoholic Drink and Tobacco

I now come to the taxes on alcoholic drink and tobacco. First drink. I have already explained that, though I think it right to raise the greater part of the revenue I require from indirect taxation, I should like to do so in as selective and unregressive a way as possible. I therefore abstain from raising the beer duty, I do, however, propose to raise the duties on spirits by £1 1s. 6d. a proof gallon, equivalent to 2s. 6d. on a bottle of whisky or gin; and to increase the


wine duties by 6s. a gallon for sherry, port and other heavy wines, and by 3s. a gallon for table wines, equivalent to 1s. a bottle and 6d. a bottle, respectively. There will be similar alterations in the duties on British wine. All these increases will come into force tomorrow and it is estimated that they will produce additional revenue amounting to £8 million from spirits and £7 million from wines.

In the case of the tobacco duty, I propose an increase from tomorrow of 4s. 4d. a lb., which will mean a price increase of 2d. per packet of 20 for most brands of cigarettes, and 3d. to 4d. an oz. for pipe tobacco.

I expect this to raise an extra £30 million of revenue a year. The relative modesty of this proposal is accounted for partly by some lack of buoyancy in the revenue—which I have of course taken fully into account in calculating the yield—and partly by the sharply adverse effect of a tobacco increase on the cost of living. But smokers of cigarettes, which account for about 90 per cent. of the revenue from tobacco, may derive some offset later on from possible developments on coupon trading and on resale price maintenance.

Hydrocarbon Oils

I also propose to raise the duty on hydrocarbon oils by 4d. a gallon from 6 o'clock this evening. This will apply to light oils, mainly petrol, and to diesel oils used as fuel in road vehicles, but the duty on heavy oils not used on the roads will remain unchanged at 2·2d. a gallon. The increased duty will yield an additional £76 million a year. I shall include a provision in the Finance Bill to enable the bus fuel grants paid to bus operators to be raised to cover the extra duty paid by them. This will cost £3 million a year and will require a Money Resolution.

My proposals so far yield an additional £151 million for a full year and in 1968–69. This is a start, but there is still a very long way to go.

Purchase Tax

I clearly need to make substantial, though still progressive, use of Purchase Tax. There are at present three rates of

Purchase Tax: 11 per cent., 16½ per cent. and 27½ per cent. The lowest rate includes furniture and clothing (except for children's clothing, which is and remains exempt). It also applies to a wide range of household utensils: Lord Butler had a hard time for bringing them into tax in 1955, but no one has since found it possible to take them out. Here I propose a relatively small increase of approximately one-seventh to bring them to a 12½ per cent. rate of tax. The middle range includes confectionery, ice cream and soft drinks. Here I propose an increase of approximately a fifth, bringing them to a 20 per cent. rate of tax. The third rate, now 27½ per cent. applies to motor cars and most durable consumer goods as well as to a wider range of luxury or substantially less essential goods. Here I propose to split the rate. For motor cars, motor cycles, refrigerators, washing machines, etc., there will be a similar increase of approximately one fifth to 33⅓ per cent. But I think that in our present circumstances it is desirable that there should be a new, much higher, rate for luxury and other less essential goods.

For these, therefore, there will be an increase of rather over four-fifths—to 50 per cent. This rate will apply to furs, jewellery and imitation jewellery, gold and silver watches and clocks, gramophone records, smokers' requisites, cameras and other photographic goods, pictorial reproductions, diaries, calendars and greeting cards, fancy and ornamental articles, perfumery, and various toilet preparations and requisites. Full details will be given in the White Paper.

In addition, I propose to bring within the scope of the tax, tape recorders, which will join gramophones at 33½ per cent., pre-recorded tapes to join records at 50 per cent., and still and ciné projectors to join cameras and other photographic goods, also at 50 per cent. I think this is a wholly justified extension, and that many people will be surprised to know that these goods have so far escaped tax.

All these changes both of rate and of scope of Purchase Tax will apply from midnight tonight.

It would perhaps be appropriate at this stage to say that, in consultation with my right hon. Friend the President of the Board of Trade, I have decided not to use the Budget statement to impose further restrictions on hire purchase. This


is in many ways an easy and attractive method of reducing demand. But there are several countervailing arguments. The first is that hire purchase restrictions do not have a long-term effect. They make an immediate impact and then die away over a period of months. That is almost the exact opposite of the effect that I wish to produce with this Budget. This Budget is concerned with an 18-months to 2-year strategy, over which period domestic demand is reduced as export demand builds up. The second point is that hire purchase restrictions on cars have already been tightened in November.

On top of this, the Purchase Tax increase and other imposts, I do not consider that a further turn of the screw here would be right. But, without cars, the effect of a further hire purchase restriction would be much reduced. It would bear only on a narrow range of industries, many of them subject to Purchase Tax at the rate which is now being raised from 27½ to 33⅓ per cent. and industries not at present fully stretched. Third, there are objections to over-frequent changes in the hire purchase regulations. There have already been four in the past year. For a twelve-month period I consider that to be enough.

The total yield of these Purchase Tax changes will bring in £163 million for a full year. But as Purchase Tax is collected quarterly in arrear the extra revenue in 1968–69 will be only £127 million. This brings the total additional revenue from Customs and Excise duties to £314 million for a full year, and £278 million in 1968–69. I still have a substantial sum to raise; but before I go on to tell the House how I propose to raise it I have three further small points to make in the Customs and Excise field.

Anglo-Irish Free Trade Agreement

The first point relates to the Anglo-Irish Free Trade Agreement of 1965. Some of the adjustments of Customs duty that we agreed to make under that Agreement in favour of goods imported from Ireland require Finance Bill legislation accompanied by resolutions under the Provisional Collection of Taxes Act to bring them into effect from 1st July next. For technical reasons several Resolutions are required on this point; explana

tions of their effect will be found in the White Paper.

The second point relates to sugar. I intend to include in the Finance Bill provisions to enable sugar used for some industrial purposes to be relieved of the sugar surcharge. This will help a number of manufacturers whose competitors abroad are able to use sugar bought at world prices.

Renewal of the Regulator

The third point is to announce that I propose to extend for a further year the power given to the Treasury to vary the Customs and Excise revenue duties and Purchase Tax, if the national economy should require it, by means of the Regulator.

VIII. TAX CHANGES: OTHER INDIRECT TAXATION

Vehicle Excise Duties

One source Mr. Deputy Speaker to which I must look for part of this further sum is the vehicle excise duties. I realise that the motoring public have already had to stomach the increase in the hydrocarbon oil duty as well as an increase in Purchase Tax on cars and motor-cycles. But I think that there is nonetheless a good case for adding an increase in the vehicle excise duties, in the situation with which I have to deal. Private motoring is growing at an enormous rate in this country. It is in most ways a highly desirable but not always an essential feature of life.

The vehicle excise duties therefore offer a buoyant source of revenue, and one which cannot be regarded as unduly regressive. About 50 per cent. of families—and these overwhelmingly within the poorer groups—are still without cars. These groups will therefore escape the direct effects of the impost which I propose. But it will be an all-round increase, although the increases will not all be at the same rate, and some indirect effects, flowing from the resulting increase in industrial and distributive costs, will therefore extend to those who do not own cars.

In 1965, when the duties were last revised, my predecessor made a much smaller increase in the rates on private cars than on other vehicles. I therefore feel


justified in proposing a substantial increase in the annual rate for private cars—from £17 10s. to £25, or about 43 per cent. The new rate will be approximately equivalent in terms of purchasing power to the rate charged on a ten horse-power car at the inception of the duties in 1921.

The rates for motor-cycles, three-wheeled vehicles and pedestrian-controlled vehicles were simplified in 1965 and in some cases were increased by as much as 100 per cent. I therefore propose a smaller proportionate increase for this category of vehicles, from the existing rates of £2, £4, and £8 respectively, to £2 10s., £5 and £10—increases of 25 per cent. At the same time, I am proposing that small powered three-wheelers, which are comparable with mopeds, should pay duty at the rate of £2 10s. rather than the £10 rate which they would otherwise attract.

Finally here, I propose to make a general increase in the duties on goods vehicles. Not to do so would leave the new private car rate considerably higher than that for the lightest goods vehicles. At the same time, I have considered with my right hon. Friend the Minister of Transport the effect on the heaviest goods vehicles of an increase in vehicle excise duty combined with an increase in fuel duty, on top of the wear and tear charges and the abnormal indivisible loads charge propose in the Transport Bill.

We feel that, in a situation in which I have to impose this extra taxation, it would not be right to levy these new charges as well. My right hon. Friend has therefore decided in the new circumstances not to proceed with these charges, and she will shortly be tabling amendments to the Transport Bill to this effect.

I propose that the duties on heavy goods vehicles should be increased by amounts of about 50 per cent. That compares favourably with the wear and tear charges which would have been equivalent to an increase of about 75 per cent. in the vehicle excise duty. I also propose that the duties on light goods vehicles should be increased by smaller amounts, falling to 33⅓ per cent. Smaller increases will be applied to showmen's vehicles and to the smaller goods vehicles operated by farmers. I shall also be proposing minor changes in the law to clarify the rate of

duty appropriate to vehicles used for both private and commercial purposes, and to extend slightly the eligibility for trade licences.

The yield from these increases is estimated at £126 million for a full year and £119 million in 1968–69. This brings the score to £440 million for a full year and £397 million in 1968–69. If I stopped now, the central Government's borrowing requirement next year would be reduced to £732 million. But I have to tell the House that this is still not yet nearly enough, if the Budget is to achieve the objectives which I have set for it. I have still a substantial sum to find, and only two main sources to which I can look for large amounts are the Selective Employment Tax and the field of direct taxation.
The Selective Employment Tax has some considerable advantages to commend it. It is the only means we have of taxing services, which are increasingly used in a relatively prosperous society, particularly by the better-off and which, in view of the changes I have just announced, could be very lightly burdened compared with goods if I were to leave S.E.T. where it is. The effect of the tax on the prices of services has not been as great as some people feared, and figures published recently indicate that it may have had a substantial and beneficial effect on productivity in the service trades—notably distribution—and perhaps also in the construction industry. For many years past there has been a steady tilt in the balance towards employment in the service trades compared with that in manufacturing industry. This has not been a healthy development in an economy placed as ours is. In the year ended 30th June, 1967, however—admittedly a period of falling employment—it looks as though that tilt has been sharply reversed: employment in the service trades has declined relatively to that in manufacturing industry. S.E.T. seems likely to have had a big effect here. Another by no means negligible advantage is that S.E.T. is a very cheap tax to collect, much more so than income tax or purchase tax, and still more than any sales tax or tax on value added.

On the other hand I am aware that it is not a wholly popular tax, but that is not perhaps a unique distinction for any tax. Collecting the tax from all employers and giving back all or part of it


to some looks, I recognise, a cumbersome procedure, and I hope that at some time in the future—though I fear that it cannot be yet—we can arrange to collect the tax only from those who are liable to it. There is also argument about its effects, which cannot easily be resolved on the basis of the relatively short experience of its working so far. I am glad to say, however, that Mr. Reddaway, of Cambridge University, has agreed to undertake an inquiry into the effects of the tax. The terms of reference will be: to examine and report on the effects of the Selective Employment Tax on prices, margins and productivity in industries on which the tax falls as a net burden, and the consequent effects on the economy generally.

This inquiry will be independent of Government, save of course that we shall be ready to give Mr. Reddaway any information he needs for the purposes of the inquiry. I intend to publish his report in due course.

I should have liked to have had the results of this inquiry, and indeed to have been able to devise a less cumbersome method of administering the tax, before making any further changes in the rate. But these easy options of waiting are simply not available to me if I am to take the steps which are essential to get the economy right this year. I therefore propose an increase of 50 per cent. in S.E.T. with effect from 2nd September of this year; this increase will raise the rate for men from 25s. to 37s. 6d. a week, and the other rates in proportion. The increase will be refunded to those employers who already qualify for refunds of the existing tax. This change in itself would yield an additional £165 million net for a full year, and £155 million net in 1968–69. The additional tax will be payable in Northern Ireland, but the revenue accruing in that country will, like the existing yield from the tax in Northern Ireland, be paid to the Northern Ireland Exchequer, who are responsible for their own refunds.

I am, however, making certain modifications in the incidence of the tax as a whole which will reduce the additional revenue by £4 million in 1968–69 and £13 million for a full year. These changes are as follows: (a) I propose to leave the effective rates of tax for part-time employees as they are, by increase

ing the refunds; (b) I propose to extend the effective rates for part-time employees to all employees over the age of 65. I trust that this will forestall any tendency the tax might have to discourage the retention of elderly people in jobs in the service trades for which they are well fitted.

In addition I am aware of the difficulties created by the tax for those parts of development areas where there is little opportunity for employment in manufacturing industry. The tourist trade is of particular importance in these localities, and I therefore propose to refund Selective Employment Tax to hotels in certain rural parts of development areas. My right hon. Friend the President of the Board of Trade will be giving the House more details of this, and of another scheme for assisting the hotel trade in the country as a whole, when he speaks tomorrow.

There are two further points on S.E.T. I should make. The first is, Mr. Deputy Speaker, that even with the 50 per cent. increase in S.E.T. the total on-cost of employing labour in the service trades, counting social security contributions and labour taxes, will be less in this country than in any E.E.C. country and very substantially less than in three of them. The overall figure here will be about 14 per cent., as against about 16 per cent. in Luxembourg and in Germany, 19 per cent. in Holland, 27 per cent. in Belgium, 37 per cent. in France, and 45 per cent. in Italy. The on-cost of employing manufacturing labour here will of course be only a fraction of those in any of these countries.

The second point is that the increase I have announced will not prevent for the future any desirable re-casting of the tax in the light of Mr. Reddaway's report and any other available evidence.

Redundancy Payments Contribution

S.E.T. is of course collected through the National Insurance stamp, and its increase will thus necessitate new stamps. We propose at the same time to make small increases in contributions to the Redundancy Fund, which are collected by the same means. Payments from this Fund have continued to run at a higher rate than receipts to the Fund, and an increase in contributions is required not only to


meet the higher level of payments but to discharge the indebtedness to the Exchequer which the Fund has been incurring. It is proposed that the employers' contribution should be increased by 2d. a week for men and by 1d. a week for women with effect from 2nd September, 1968. This is not, strictly, a budgetary matter for the contributions go into the Redundancy Fund not into the Consolidated Fund. But it becomes a budgetary matter if through improvident finance we allow a deficit to accumulate. It is, however, proper to announce it now, since the introduction of these increases in these contributions will coincide with the introduction of the increase in S.E.T.

The net proceeds of the changes in S.E.T. bring the total additional revenue to the Consolidated Fund resulting from my proposals so far to £592 million for a full year and £548 million in 1968–69, which would bring the Central Government borrowing requirement next year down to £581 million.

IX. TAX CHANGES: DIRECT TAXATION

I turn now to direct taxation. My predecessor made a beginning with the reform of direct taxation and I hope to continue the work, more particularly in the field of personal taxation. In that field, my inclination is towards fewer loopholes and somewhat lower rates. The high rates breed the relentless search for loopholes which occupies a good deal of the time of our more skilled accountants and our more ingenious rich. I am proposing to close up some of the loopholes this year, but major reform and simplification cannot be carried out at the stroke of a pen. In the first place, simplification often runs counter to the demands of equity, and it requires a great deal of careful work to balance the two. Secondly, as I said earlier, major alterations in the tax code need long preparation and mean a great deal of additional work for the already over-stretched Department of Inland Revenue. Regretfully, therefore, I am not able this year to attempt a major reform in Estate Duty. In the meantime, however, I have three proposals to make in that field.

Estate Duty

First, I propose to alter the law relating to the period before a death during which gifts are liable to Estate Duty. The full period is, and has for many years been, five years. In 1960, when the Government of the day introduced proposals for tapering the liability in the third, fourth and fifth years, the Opposition welcomed the principle of tapering, but argued strongly for tapering outward from the five-year limit, not inwards. The force of the views then expressed seems to me to have lost nothing with the passage of time. I therefore propose to retain the principle of tapering, but to extend the full period by two years, from five to seven years. Gifts made within four years of a death will be liable to duty in full; the liability will be progressively tapered, on the present scale, in respect of gifts made during the fifth, sixth and seventh years before a death.

Second, I propose to put an end to the device, which has been widely exploited, of making gifts of insurance policies in such a form that they rank as a separate estate for Estate Duty purposes. I propose that, in future, these policies, and other property charged as gifts, shall be aggregated with the rest of the deceased's estate for the purposes of determining the rate of duty.

Third, I propose to close a loophole concerned with discretionary trusts which has been opened by a recent decision of the Courts.

These changes will take effect in the case of deaths occurring after today, but the new seven-year rule for gifts will not apply to gifts made more than five years before today. It is estimated that together they will bring in £5½ million in 1968–69 and £11 million for a full year.

Corporation Tax Amendments

I propose three amendments to the Corporation Tax provisions of the 1965 Finance Act. First, there has been an increase in the practice whereby companies offer shareholders the option of taking either a cash dividend or scrip in lieu. This is a device designed to avoid liability to Income Tax and Surtax. I propose that, where such an option is offered, the liability of the shareholder will in all cases be calculated as if he had taken the cash dividend. The other two are minor


amendments. One concerns partnerships between individuals and companies, and the other concerns overseas life assurance companies selling annuities through branches in this country. In both instances, the original provisions fail to give full effect to their obvious intention, and could give relief for which there is no possible justification. These defects will be corrected.

Purchases and Sales of Know-how

During the Finance Bill debates last year, my right hon. Friend the Chief Secretary promised that the tax treatment of purchases and sales of know-how would be reviewed in consultation with industry. As a result, we have come to the conclusion that, while in practice the existing law as interpreted by the courts works well enough in the generality of cases, it ought to be clarified and certain minor defects remedied so that, in negotiating for know-how, both seller and purchaser know where they stand. In general, receipts from the sale of know-how will be treated as income, except where it is sold as an element in the disposal of a business, when the charge will be to Capital Gains Tax. I propose to introduce a new capital allowance giving the purchaser relief over six years in those cases where he cannot get relief under the present law.

Double Taxation Credit

One minor change relates to the method of calculating how much United Kingdom tax is available for credit when income has suffered overseas tax. The House will remember that in 1965 the Finance Act made provision for using an individual's marginal tax rate instead of his average tax rate for this purpose but that the operation of the new provision was to be postponed until a date to be fixed later. With the progress that has now been made in renegotiating our double taxation agreements, I have decided that the way is now clear to ask Parliament to bring that provision into operation. It involves a useful simplification of what can sometimes be a complicated calculation.

Interest on Arrears of Tax

I am proposing another amendment which will make a considerable contribu

tion to the revenue in the coming year. This relates to the interest charged on Income Tax, Surtax, Corporation Tax and Capital Gains Tax which is not paid promptly. At present, except in the case of tax deducted under Schedule F, interest is not charged if the tax is paid within three months of the date when it becomes due. I propose that this period should be shortened to two months. This change, which will apply to tax becoming due on or after 1st July next, should provide a permanent benefit to the Exchequer by encouraging taxpayers to meet their liabilities more promptly. I estimate that it will also bring into the year 1968–69 about £25 million of tax which would otherwise not be received until the following year.

Post-Cessation Receipts

I now turn to a matter which will be of interest, but not I fear of favourable interest, to hon. and learned Members on both sides of the House. That is the question of post-cessation receipts. Under the present law, barristers and certain other professional people pay no tax on those earnings of their profession which they receive after they have ceased to practise. Sometimes several such cessations take place in the course of a professional career. This is, I fear, an indefensible anomaly, the more so as for some years now self-employed persons have been able to get tax relief for payments to provide annuities on their retirement. I therefore propose to end the anomaly as from today and make such receipts taxable. There is, however, a problem for those, well-advanced in their professional carrer, who have been counting upon the anomaly when they retire. I therefore propose to soften the blow. There will be a tapering arrangement for those now over 50. Anyone aged 51 on 6th April, 1968, will be entitled to receive 5 per cent. of his last year's earnings tax-free. The percentage will increase by five points for each additional year of age; for those already 65 or over, 75 per cent. will remain tax-free.

Sir Gerald Nabarro: Ah, that is the point.

Life Assurance

Mr. Jenkins: I come now to life assurance. I say at once that I have no


desire to weaken the tax position of legitimate life assurance or endowment schemes. But there are some such schemes which have a great deal more to do with tax avoidance than with saving against retirement or with safeguarding the family against the premature death of the policy-holder. My predecessor last year indicated that he was reviewing such schemes with a view to action. I now propose to take such action. I think it is abundantly justified. There have, for instance, been some most blatant recent press advertisements stressing the tax avoidance advantages of single premium policies.
I propose, therefore, to introduce new conditions which policies taken out after today must satisfy if they are to enjoy the present income tax relief on the premiums and freedom from surtax on the proceeds. These conditions will be spelt out in the Finance Bill; I here give only the broad outline. The policy must run for a minimum period of 10 years; there must be a reasonably even spread of premiums; and the capital sum payable on death must be at least 75 per cent. of the total premiums payable under the policy. If a policy does not satisfy these conditions, the premiums will not rank for income tax relief and there will be a surtax charge on the proceeds, less the premiums paid. Capital redemption policies taken out by individuals will be subject to the same charge. The charge will also apply where a policy which satisfies the qualifying conditions is surrendered or sold in the first 10 years of its term or before three-quarters of the term has expired, whichever period is shorter.
My object in these proposals is to stop abuses. The ordinary policies which the vast majority of people take out will be completely unaffected; and, as I have said, the proposals do not apply at all to policies already in existence.
I also propose to strengthen the present provisions for disallowing relief from surtax for interest on borrowed money which is used to pay premiums on life assurance policies.
I now turn to two proposals which, without any increase in the rates of tax, will bring in considerable amounts of revenue.

Apportionment of Marriage Allowance

The first relates to the tax allowance given to a husband in the year of his marriage. At present the full marriage allowance is due, however late in the fiscal year the marriage takes place. There tends, in consequence, to be a spate of marriages as 6th April approaches—or in October if the wife is proposing to continue to work. I do not think it particularly appropriate that the accidents of the tax calendar should make so much difference to the tax position of a newly-married couple. I therefore propose that as from 6th April next the husband will get the full tax allowance only if he is married for the full year, which I define as meaning on or before 5th May. If he marries later in the year he will get only the appropriate monthly proportion. This change should produce about £12 million in 1968–69, and £15 million for a full year.

Income of Minors

The second proposal relates to the tax position of families where children have investment income of their own or investment income is held or applied on their behalf.

Our tax system has always treated the income of husband and wife as one, on the basis that they are a single spending unit. Logically the unit for tax purposes ought to include children as well as husband and wife, for the children's income, just as much as the parents', is available for the family and is reflected in its living standards. The fact that the same amount of family income is divided in one family between parents and children and in another belongs only to the parents ought not to involve a difference in tax liability. Moreover, the fact that a child's income has up to now been taxed separately from that of its parents has encouraged arrangements under which grandparents or other relations have provided income or capital to children with the object of benefiting the family as a whole. I therefore propose to carry the principle of aggregation further, so that the investment income of minor children will be aggregated with that of their parents for tax purposes.

The new rule for the aggregation of a child's investment income with his parents' income will not come into operation this year. The legislation must,


however, be included in this year's Finance Bill, because a considerable amount of preparatory work by the Inland Revenue is necessary beforehand. The new rule will take effect from 1969–70.

The new legislation will establish the principle that a child's investment income is to be aggregated with that of its parents. The picture will not be complete, however, until we have dealt with certain associated questions, such as the use of settlements to accumulate income. I give notice now that in next year's Budget I will attend to these details so that the legislation as a whole can come into effect from 6th April, 1969. Obviously, therefore, no revenue can accrue in 1968–69. But the significance of this change is indicated by the fact that it is estimated that it will produce £25 million for a full year. This shows how greatly families with established wealth available to them have benefited over those with the same gross income coming entirely from the efforts of the parents. I do not think any theory of incentives justifies that.

The net additional yield from the changes in direct taxation I have described so far—many of which will have only a small effect—will be £51 million for a full year, and £42 million in 1968–69.

Personal Taxation

I now come to the major aspects of personal taxation. We already have a commitment to recover the full amount of the April increases in family allowances from people who pay tax at the standard rate, with small recoveries from those who pay only at the reduced rates. The most accurate and therefore the best way to do this is not by an across-the-board reduction in the children's Income Tax allowance. This might be the more easily comprehensible, but it would also be the more crude method. It would create a number of anomalies, associated with the fact that some families would lose their Income Tax allowances without getting family allowances. I therefore propose a reduction in the total tax allowances of a family by the necessary amount for each child who qualifies for family allowances. The reduction called for on behalf of the 7s. increase previously announced is £30. This would do

the job for standard-rate payers with an almost tailor-made precision.

But, as I announced earlier in this speech, we have decided to make a further increase in family allowances early in October. There will thus be a "two stage" operation, an increase of 7s. a week in April, 1968 and a further increase of 3s. in October, 1968, making a total increase of 10s. a week from midway through the financial year. The benefit of this further increase, as with the 7s. increase, will be confined to the poorer families. This will mean a somewhat bigger reduction in tax allowances than £30. In the simple case where the child ranks for family allowance for the whole of 1968–69, the reduction in tax allowances for that year will be £36, that is, at the rate of £30 per annum for the 7s. increase in the first half of the year and £42 per annum for the 10s. increase in the second half of the year. Appropriate adjustments will be made for cases where the child ranks for family allowance for part of the year only.

Similar arrangements will be applied to the allowances paid to the Armed Services abroad in lieu of the statutory family allowances.

In the case of families where long-term social security benefits are part of their taxable income—widows receiving pensions under the National Insurance and Industrial Injuries Acts, National Insurance retirement pensioners, and war widows—these reductions in tax allowances will not be applied, since the adjustments in their child dependancy allowances will largely offset the increases in family allowances.

The Inland Revenue will need to re-code parents in the P.A.Y.E. field to take account of the second increase in family allowances, as well as the year's reduction in tax allowances. This will not be practicable straightaway; and at the beginning of the tax year 1968–69 tax will be deducted on the basis of existing codes, so that too little tax will be deducted for a time. But in order to bring the revised code numbers into operation as soon as possible, the Inland Revenue propose to concentrate their efforts on the P.A.Y.E. recoiling, and the new code numbers will come into effect in the P.A.Y.E. week beginning on 27th April. In this week the taxpayers affected


will begin to pay tax on the basis of their new code numbers, and at the same time the tax underpaid in the three previous weeks by the use of their existing code numbers will be collected. But the number of weeks' arrears to be collected will be of manageable proportions, and of course in the cases affected there will be the extra 7s. family allowance from April and a further 3s. from October.

The revenue yield from these recoveries is estimated at £83 million for a full year and £57 million in 1968–69. These increases, though in part announced earlier, will, of course, be in addition to the revenue on the basis of existing taxation, the figures for which I gave the House earlier.

The increase in family allowances, combined with the recovery arrangements, will have the inevitable result of bringing about 300,000 additional people into tax. This I regret, both because I regard it as in general highly desirable, on grounds both of fairness and administrative economy, to avoid the collection of small amounts of tax from people with small incomes. But it was not possible to produce a sound scheme for their exemption without the sacrifice of appreciable amounts of revenue. This year I cannot afford that. But I regard a raising of the threshold of tax as a strong priority for a Budget in easier circumstances.

Age Allowance

There is, however, Mr. Deputy Speaker, one small concession which I am able to make even at present. Last year the limits for the age exemption for persons aged 65 and over were raised to £401 for single persons and £643 for married couples to take account of the increase in the National Insurance retirement pension which took place at the end of October. In 1968–69 a full year's pension increase will be received and I have decided to raise the exemption limits again. I believe that when what I hope will be a relatively short-term stringency has to be applied the elderly are entitled to some special consideration. The new figures will be £415 for single persons and £665 for married couples. The cost will be £2½ million for a full year, and £1½ million in 1968–69.

Rate of Income Tax

I turn to the rate of Income Tax. I propose no change in the standard rate of Income Tax, or in the reduced rates or in the width of the bands. In the context of this year's Budget needs, a reduction would of course have been out of the question. It has required great effort to avoid an increase. But for reasons I gave in the passage introducing my measures I believe this effort to be worth-while. Nor will there be any change in the rates of Surtax as such. No earned income, save for the effects of the recoveries of family allowances, the principle of which had already been announced, will therefore be subject to higher direct taxation. This I believe to be justified on the ground of incentive.

X. TAXATION OF BENEFITS FROM OWNERSHIP

The same consideration, Mr. Deputy Speaker, does not however apply to unearned income, particularly in the higher ranges, where no one can seriously pretend that the benefits have been achieved as a result of thrift on the part of the individual concerned. On the contrary those enjoying such incomes, and even more important the possession of the large sums of capital which go with them, have mostly lived at very high standards throughout their lives. Now people in this group have not been backward in urging me to be bold, to be ruthless, and to impose the necessary sacrifices all round. I am sure that, with their high stake in the country and the genuine sense of public responsibility which activiates many of them, they would not wish to be excluded from such all-round sacrifice. And yet, were I to do nothing more, that would largely be the case. The indirect taxation I have proposed, as I have suggested, will in very considerable part fall upon those with average or somewhat above average incomes. The worst-off do not much buy furs or motor cars, or even refrigerators, washing machines and wines and spirits. But it cannot seriously be argued that indirect taxation, however non-regressive, is a significant burden upon the rich.

I have therefore been concerned lest the year or two of sacrifice which inevitably lies ahead, should result in a redistribution of real purchasing power in


favour of those who are already best off. It would be intolerable for that to happen under the cloak of all-round sacrifice. And my concern has been fortified by the increase in profits, and consequently in equity prices, which is likely for this year. I have had to consider very carefully how I could best deal with this without impairing the effective functioning of a mixed economy.

Corporation Tax

Corporation Tax would be the most obvious method of dealing with an increase in profits. But an increase in profits—particularly from the somewhat depressed level at which they have been running in the past 18 months—is in many ways desirable. Without it it would be difficult to get the spurt in company investment which is essential to our future efficiency. Furthermore my predecessor announced in November that Corporation Tax on profits earned in the year now ending would be raised from 40 to 42½ per cent., an increase which we ex-pea to bring in an extra £57 million of revenue in 1968–69, and £98 million for a full year. I do not think it would be right to make a second change in the rate of Corporation Tax for this year.

Capital Gains Tax

The next possibility is an increase in the rate of Capital Gains Tax. This tax is making a material and growing contribution to the revenue. The yield this year is approximately £16 million as against £7 million last year. And for 1968–69 I estimate a yield of £45 million. There is therefore no question of the tax, overwhelmingly justified in equity, producing a negligible revenue in return for a great expenditure of administrative effort. Nevertheless I do not consider that it would now be appropriate to raise the rate of tax. It is in my view an essential feature of our long-term taxation arrangements. This requires a long-term view of the rate at which it should stand. This view was given by my predecessor two years ago, and I stand by what he said. Nor, by its nature, is it a tax suitable for a short-term and limited surcharge. This would produce all the distorting effects of a reluctance to realise during the period of the surcharge, with a possible fall in the immediate yield.

There are however certain limited changes in the incidence of the tax which I propose. In making these proposals I have particularly in mind the need to simplify the tax wherever possible.

First I propose that the gains of individuals shall be exempt from tax if, after deducting losses, they do not exceed £50 for the year.

Secondly I propose to simplify the rules for calculating the Capital Gains Tax liability on sales of quoted shares and securities acquired before 6th April, 1965. For the future such shares and securities will no longer be "pooled" with similar assets acquired since 6th April, 1965, and in computing gains on them it will be necessary only to compare their acquisition cost with their value at 6th April, 1965. As a further measure of simplification taxpayers may elect once and for all to disregard the actual cost of their pre-1965 holdings of equity shares taken as a whole and to base their gain or loss solely on the 6th April. 1965, value; a similar election will be allowed for all their fixed interest securities.

Third, I propose to exempt entirely from Capital Gains Tax all chattels which rank as wasting assets, that is, chattels that have a predictable life of not more than 50 years. It follows that no relief will be given for losses on such chattels.

I hope that these changes will save both taxpayers—and their professional advisers—and the Inland Revenue a certain amount of effort at small cost to the revenue.

My fourth proposal, however, is for the partial withdrawal of an exemption. Gains on certain Government securities within what is known as the "neutral zone" are at present exempt from both the short-term and the long-term tax. When we introduced the exemption in 1965 we had in mind the genuine investor who had taken up the securities at a discount on the understanding that he would be repaid at par. But we find that the main benefit of the exemption for short-term gains is going to those who deliberately buy and sell within a period of months purely in order to get interest on the securities in tax-free form. I see no reason why this sort of gain should


be exempted and I propose, therefore, to withdraw the exemption so far as the short-term tax is concerned and to charge all persons, including companies, who buy and sell within a year. This will produce additional revenue of £2½ million a year. The exemption will, of course, continue as regards the long-term Capital Gains Tax.

There will also be a number of minor changes, in relation to both the short-term and the long-term tax, which I need not describe in detail.

Special Charge

Having excluded an increase in the Capital Gains Tax or a further increase in the Corporation Tax, I am left therefore with the possibility of some impost upon the private wealth of individuals. In general I believe this to be a better method of approach than a fiscal reduction of company profits. The introduction of an annual wealth tax has been much canvassed. I will not spend time on a discussion of the merits of such a tax; since it would be quite impracticable at present because of the problems of valuation which would be involved. I have therefore decided that it is right, in the context of this uniquely rigorous Budget, to propose a special charge to be calculated and expressed as a charge upon investment income, as computed for the charge to Surtax for the year 1967–68. The charge will not be payable on investment incomes of £3,000 or less. The £3,000 limit will be increased by those personal allowances which an individual can claim in calculating his Surtax. Above that level it will be graduated. Between £3,000 and £4,000 it will be at the rate of 2s. in the £ between £4,000 and £5,000 at the rate of 3s; between £5,000 and £8,000 at the rate of 6s.; and above £8,000 at the rate of 9s. Its yield is estimated at £100 million, of which it is expected that £70 million will be received in 1968–69.

Although this charge Mr. Deputy Speaker will be calculated upon investment income and may at the lower ranges be paid out of income—at an investment income of £4,000 for instance, the charge for a married man with two children under 11 will be £65, and at £5,000 it will be £197 10s.—I recognise and intend that in the higher ranges it will be a small tax upon capital. I make no apology for

that, because there can be little doubt that, with fortunes producing really large investment incomes, expenditure is determined much more by the possession of capital than by the size of the net income. I have no doubt that it will be said that as a small charge upon capital this will make no contribution towards reducing spending power. I by no means wholly accept that. But in any event the corollary is the extremely challenging one that the expenditure of those with accumulated wealth, unlike that of the rest of the community, must be recognised and accepted as being outside the control of fiscal policy, even at a time when all-round sacrifices are necessary. I hope and believe that this special charge will lead to some reduction in consumption. But to the extent that fortunately placed individuals decide that it should not reduce their spending, it is the more reasonable that they should make some small contribution from their capital.

This charge is imposed for one year only. It obviously should not, and indeed could not, be repeated in its present form except at long intervals. It would otherwise militate against deployment of capital so as to produce investment income—although there is a good deal of that already. This should not, however, be taken as precluding further exploration of the ways in which the taxable capacity of those who possess wealth should be differentiated from that of those who depend primarily on wages and salaries. This might make it both possible and desirable to reduce the highest rates of tax on incomes.

The net additional yield from all these changes in the field of direct taxation would be £331 million for a full year; that includes the yield of the increase in the Corporation Tax and of the recoveries of increases in family allowances and the whole yield of the special charge, which I do not intend to repeat next year. The net additional yield in 1968–69 will be £227 million.

XI. CONCLUSION

This brings the total yield from all the increases in taxation I have described to £923 million for a full year and £775 million in 1968–69. Even without the measures already announced before the


Budget—the increase of Corporation Tax to 42½ per cent. and the tax recoveries of the 7s. increase in the family allowance—the additional taxation announced in this Budget amounts to £766 million for a full year and £671 million in 1968–69.

Those figures include the proceeds of the recovery of the further 3s. increase in the family allowance. The increase itself, plus the increase in the fuel duty grant to bus operators, will add £29 million in 1968–69 to the figures of Consolidated Fund expenditure which I gave the House earlier. The net result of all these changes is thus to raise the estimated surplus to be transferred from the Consolidated Fund to the National Loans Fund in 1968–69 from £640 million to £1,386 million, and thus to reduce the National Loans Fund borrowing requirement by £746 million, from £1,104 million to £358 million.

The House will also be intrested to know now where we stand on the net borrowing requirement of the central Government. This year, as I have already told the House, it will be about £1,400 million. In the Letter of Intent which my predecessor wrote to the I.M.F. on 29th November last we indicated that we hoped to keep the figure for next year to a maximum of £1,000 million. The result of all the measures announced in my speech this afternoon is to reduce the estimate for next year to £364 million. Some of my hon. Friends who were very worried about the Letter of Intent will perhaps now understand what I meant when I said in December that it was not the I.M.F. that I was worried about, but the harsh demands of the situation.

The House will be relieved to hear that I have no more proposals to make. I have imposed heavy burdens, but I believe that I have spread them fairly and in a way best calculated not to impair incentive. Where I have been in doubt I have erred on the side of caution.

No Chancellor can begin to guarantee success. But I believe that I have done what is necessary here at home to give us a high chance of achieving it. There is now no rational cause for the British economy not going forward to strong success. Our exchange rate is one that makes us fully competitive. We have

not hesitated to take as much out of the economy as is necessary to gain the full advantages of devaluation. And we have made the necessary changes so that, after an inevitable transitional period, we shall for the first time since the war be carrying no heavier a defence commitment than the strong economies of Europe. In a rational world this should give us the firm prospect of a secure balance of payments and steady growth at home. Even in an irrational one it gives us the great advantage of being able to speak with the knowledge that our own house is in order. And the voice in which we shall speak will be one of sanity, of a determination to secure stability without deflation, of a desire for international co-operation without the sacrifice of our own essential national interests, and of a conviction that we must fashion a world monetary system for producers and not for speculators.

PROVISIONAL COLLECTION OF TAXES

Resolved,
That pursuant to Section 5 of the Provisional Collection of Taxes Act, 1968, provisional statutory effect shall be given to the following motions—

(a) Spirits (Excise and Customs) (motion No. 2)
(b) Wine (Customs) (motion No. 3)
(c) British wine (Excise) (motion No. 4)
(d) Tobacco (Customs and Excise) (motion No. 5)
(e) Hydrocarbon oils (Customs and Excise) (motion No. 6)
(f) Matches (Customs) (motion No. 7)
(g) Mechanical lighters (Customs) (motion No. 8)
(h) Hops, hop oil, etc. (Customs) (motion No. 9)
(i) Excise (General betting duty) (motion No. 10)
(j) Excise (Pool betting duty) (motion No. 11)
(k) Excise (Gaming licence duty) (motion No. 12)
(l) Purchase tax (motion No. 13)
(m) Vehicles excise duty (motion No. 15)
(n) Income tax (charge and rates for 1968–69) (motion No. 16)
(o) Income tax (surtax rates for 1967–68) (motion No. 17)
(p) Income tax (alterations in personal reliefs) (motion No. 18).—[Mr. Roy Jenkins.]

AMENDMENT OF THE LAW

Motion made, and Question proposed,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that, without prejudice to any authorisation by virtue of any Resolution relating to purchase tax or selective employment tax, this Resolution does not extend to the making of amendments of the enactments relating to either of those taxes so as to give relief from tax.—[Mr. Roy Jenkins.]

6.3 p.m.

Mr. Edward Heath: The House has listened this afternoon with the utmost attention to a hard, cold, Budget, without one glimmer of warmth, for even the Chancellor's concession about family allowances he said, if I understood him correctly, will be paid by the sick. The House has listened to and admires the lucidity with which the Chancellor has presented what he himself described as a massive Budget. We offer our sincere congratulations to him upon this. We admire the stamina which he has shown in a speech lasting almost two and a quarter hours, and I think that we may also congratulate the House upon the endurance which it has shown in listening to these proposals.
This is a hard, cold, Budget, which has increased the burdens upon the British people by £923 million—more than two and a half times the maximum which any Chancellor of the Exchequer has ever imposed in one Budget before, and this from a leading member of a Government whose Prime Minister and whose present Home Secretary promised the country in March, 1966 that there would be no general increase in taxation—[HON. MEMBERS: "Resign."] Since the Labour Government came to power 3½ years ago, they have imposed £2,260 million-worth of extra taxation on the British people—[HON. MEMBERS: "Disgraceful."] That is the cost to them of 3½ years of Labour Government. Now, we are seeing the culmination of 3½ years of disastrous rule.
It has been a hard Budget and a much harder Budget than if the Labour Government had not been forced into devaluation by their own failures of policy. It has been a much harder Budget than if the Chancellor, as he said, had not had the biggest current trade deficit last

year since 1951—£552 million. It was a hard Budget, and much harder than if the Government had not allowed Government expenditure to rise wildly out of control last year as they did. It was a hard Budget, and a much harder Budget than if the present Home Secretary and the present Chancellor of the Exchequer had taken the measures which they needed to take immediately after devaluation. It has been a harder Budget than was necessary because the Government are struggling for their life to try to restore some semblance of confidence in themselves and in the £ sterling. That is the truth.
They are imposing these burdens on the British people because of their own disastrous incompetence. What the Chancellor has been struggling to do for 2½ hours is to restore some sort of confidence in the Government to industry at home and people abroad—

Mr. William Hamilton: And he has done it.

Mr. Heath: The hon. Gentleman says that he has done it—and what a price the country is paying for it.
Let us take the criteria by which the Budget should be judged. First, what incentives to enterprise, either for individuals or for corporate bodies, has the Chancellor provided? Second, what impact will this Budget have on industrial costs and, therefore, on our exports? Third, what real encouragement is there to savings by the people as an alternative to heavier taxation? Fourth, to what extent has the right hon. Gentleman controlled the borrowing not only of central Government but of local government and nationalised industries? Fifth, what further attempts is he making to get Government expenditure under control? Sixth, what direct help is he giving to the balance of payments or to import substitution by this Budget? Let us look at each of those criteria.
First of all, incentives. There are none whatever in this Budget. There are none of a personal kind and none of a corporate kind. The Chancellor was very forthcoming in his condemnation of his right hon. Friend the present Home Secretary for all his mistakes in his taxation policy and legislation while he was Chancellor. He has been at pains to learn, and he has not raised additional


burdens on earned income, but he has done nothing whatever to give any sort of hope to the British people for the future or to give them incentives.
Second, on industrial costs, the fuel duties will fall on industry, the heavy goods vehicle duties will fall on industry. The Chancellor boasted that he had dished the Minister of Transport and abolished the wear and tear charge, but there will still be an additional burden on industrial costs because of this additional taxation.
Selective Employment Tax is also an additional burden on service industries, many of which are concerned with exporting. While it is useful to have this burden lowered in Scotland, the West Country and the development areas, it still remains on the tourist industry and many other import-substituting or export-earning industries.
Third, savings. There is no savings policy in this Budget. We do not accept the Chancellor's statement that he could not get around the difficulties of giving people a real incentive to savings. There are schemes which would encourage the middle salary and wage earning worker to contribute heavily to savings without the possibility of changing alternative savings into the new scheme. The Chancellor has shown a conspicuous lack of imagination and has given way to orthodoxy in this matter.
Fourth, on borrowing, he has, of course, complied with the Letter of Intent—he had no alternative—but of the rest of the borrowing, by nationalised industries and local government, we heard nothing.
The fifth is Government expenditure. No further actions are being taken to reduce Government expenditure and we can have no real confidence that the Chancellor will keep it down in the way in which he blandly promised. The sixth is direct or indirect help for exports. There is nothing whatever in the Budget. There is no direct help and no indirect help and, as for import saving, the Chancellor could have moved in agriculture and saved great imports of foodstuffs, but he has done nothing whatever about this. Looking at the Budget by its criteria, what can the Chancellor show, either by way of giving incentives and encouragement to help industry or to lift the burdens to help encourage exports or import saving?

He can show nothing whatever in this Budget.
The right hon. Gentleman said that the object is to make devaluation work. This is, in fact, only part of the object. The real object is to cover up the Government's failures in the past—[Interruption.]—to cover up the fact that they are not prepared to make a free enterprise economy work effectively and, in particular, that they are not prepared to have a free enterprise economy in which wages and salaries can be fixed freely and effectively without statutory interference by the Government.
It is a cover for the fact that the Government's creditors insist on a stiff, tough statutory policy for wages. No doubt this is a condition of the additional standby. The Government have put Britain in pawn, and the Government must stomach it. I for one, and many others in this country, bitterly resent it[Interruption.]—I bitterly resent the fact that countries which are running a private enterprise system—like the United States, the Federal Republic of Germany, Italy, Benelux and Sweden—would never dream of instituting statutory wage or price control. Their Governments would never dare to put to their people the sort of project which the Chancellor has put this afternoon for statutory control, but nevertheless they have told Her Majesty's Government that this is what they have to impose on the British people.

Mr. Andrew Faulds: rose—

Hon. Members: Sit down.

Mr. Heath: I will not give way.

Mr. Faulds: rose—

Hon. Members: Name him.

Mr. Deputy Speaker (Sir Eric Fletcher): Order. The hon. Gentleman must resume his seat if the right hon. Gentleman who is speaking does not give way.

Mr. Heath: —and even more I despise the men on the Front Bench opposite who have brought us to this humiliation. [Interruption.]

Several Hon. Members: rose—

Mr. Heath: The Government are now, for the third time, demanding greater


statutory powers over wages and prices. The details remain to be given to us by the Secretary of State on Thursday, but the policy has been clearly stated by the Chancellor. In 1966 my hon. Friends opposed the Prices and Incomes Act. We voted against Parts 2 and 4 and we have voted against the Orders which have been made under that legislation. All the figures show, as my right hon. Friend the Member for Mitcham (Mr. R. Carr) will detail in the debate on Thursday, that these powers have failed in the last two years.

Mr. Woodrow Wyatt: rose—

Mr. Heath: The hon. Gentleman will no doubt have a chance to speak during the debate, which will go on until next Monday. He may even write about it in a particular periodical, which will no doubt support him.
The Government have consistently said that they wanted only limited powers for a short period. In March, 1966, the Prime Minister said that it would be monstrous ever to think of having such powers at all. The First Secretary as he then was, now the Foreign Secretary, said that it was in the hope and expectation that these were only to be temporary powers that they were being taken. That was the second time round. Every time we have constantly doubted the Government's word—and on each occasion we have been proved absolutely right. The powers have been renewed for longer periods, and this is to happen again. More powers of compulsion have been taken on each occasion, and now these powers are becoming a permanent feature of the Socialist Government in Britain.
We have been consistent throughout in opposing this policy of reliance on statutory controls. We are convinced that it is wrong in principle—that the Government are wrong in using such compulsion—and we now see its failure in practice. We have no confidence whatever in the undertakings which the Government give about the use of these powers and we will continue to oppose them, and to oppose the Government's demands. [Interruption.] I tell the Chancellor that.
I am quite prepared for a tough incomes policy—[Interruption.]—to ensure that costs do not outrun productivity, but

it must be achieved by using all the aspects of economic policy in a complete economic context.

Mr. Michael McGuire: What are they?

Mr. Heath: I will come to them.
The Government really want these powers because they cannot or will not control Government expenditure; because they cannot or will not tackle the monopolistic powers of certain trade unions which they use in free bargaining; because they will not take the action which is necessary to produce a competitive, dynamic economy; and because they have become obsessed with using the legal powers of compulsion instead of using the real powers which they should have to deal with the obstacles to growth which exist in the economy. That is why the Government, unprepared to take these actions, are seeking additional compulsory powers.
The Government should cut back Government expenditure, reform trade union law, reduce individual tariffs, deal with monopoly situations—that is what the President of the Board of Trade should be doing—provide individual incentives, get rid of restrictive practices and wipe out overmanning in the public sector. Above all, the Government have the responsibility to ensure that the vast public sector which is now under their control does not grant wages which are more than productivity will justify. It is for the Government to stand up on this matter and take the action which is necessary in their own sector. The new powers which they are taking will have only the same impact as the preceding powers and—

Mr. Stan Newens: rose—

Mr. Heath: As I was saying—

Mr. Newens: What powers would the right hon. Gentleman take?

Several Hon. Members: rose—

Mr. Speaker: Order. Hon. Members must control themselves.

Mr. Newens: rose—

Hon. Members: Sit down.

Mr. Speaker: Order. The right hon. Gentleman is obviously not going to give


way. The hon. Gentleman must, therefore, resume his seat.

Mr. Heath: As hon. Gentlemen opposite below the Gangway know full well, in the process of operating this policy the friction created in industrial relations will be immense and the control of the trade unions will pass to the militants rather than to those who can help the economy.
If this Government are allowed to survive long enough to bring Britain to the brink—[Interruption.] Any Government must take the utmost powers in time of war, but the job of the Government today is to mobilise the effort of a free people, to rouse them and give them hope, and to show them how enterprise, risk-taking and hard work can bring their just reward—that cannot be done by a national lottery—and to show how lethargy, obstruction and failure pay the penalties.
The last Chancellor of the Exchequer concluded his Budget statement with the stirring call to the ship of State, "Steady as she goes". He ended in devaluation. His successor has chosen, not inappropriately for the presentation of his Budget, Lifeboat Day. Lifeboat Day for the hard Labour Budget. One right hon. Gentleman has already abandoned the sinking ship. It is not a lifeboat which this country needs, it is control at the helm and new men to man the ship. That is the only way in which this country will be brought safely into port.

6.22 p.m.

Mr. A. Woodburn: We meet at a time of crisis and in a time of crisis the people of this country expect from the Government of the day action that will tend to solve that crisis. I wish to congratulate the Chancellor of the Exchequer today on rising to the occasion. If he had presented a Budget today which did not deal with the situation of recurring balance of payments difficulties the Government would have stood condemned. The Chancellor has brought forward a Budget which at least will satisfy the people that an attempt is being made to bring to an end this balance of payments problem which has been occurring year after year.
I listened with interest to the Leader of the Opposition. I am sorry that he is not now present. The one thing which

surprised me about his speech was that he did not get round to fastening responsibility for all the taxes and everything on the Prime Minister. He burns midnight oil when each crisis takes place and produces one explanation for the difficulties which the world and the country are in—the Prime Minister. He did not do that today. He must have forgotten his usual cure for all evils.
The Chancellor in producing this Budget, I think, has satisfied the public that the sacrifices which have to be made to meet the problems are being spread equitably and reasonably over the whole population. The public expect to make sacrifices, but they want them to be fair and reasonable and fair between person and person.
The Chancellor has asked those who have most to make a very considerable sacrifice in this present year. I think that will be welcomed by the great majority of the population. He also asked those who have luxury spending to make a very considerable sacrifice. All of us must recognise that the first thing to do when being fair is to try not to impose sacrifices on those with least ability to bear them. The Chancellor is asking those who have least to give to make their sacrifice in some other direction.
We are promised in this Budget that there will be restraint on incomes and prices in the next spate of legislation. Undoubtedly restraint on incomes is a vital part of this policy. It is quite obvious to every housewife that one cannot spend 23s. out of 20s. income. This country has been doing that for some years, with the result that we have got into more and more difficulty. When this Government took office they inherited a balance of payments—or rather, an imbalance of payments—to the extent of about £800 million. By 1966 we had almost got to the extent of bringing that down to about £33 million. Then we were struck by several international events over which we had no control, such as the Israeli-Arab war. We also inherited the Rhodesian problem. Both of these have cost us a very great deal in foreign exchange.
In addition, unfortunately, just at the time when we were reaching the point of solvency we were struck by two great industrial disputes in this country one


after the other, the seamen's strike and the dockers' strike. They threw us back in exports to a very great extent and made a considerable contribution to the growing disquiet abroad in regard to the possibility of maintaining the value of the £.
While I sympathise with people who want their grievances remedied—and this applies to everyone—we must recognise that we do not remedy a grievance by bringing ruin on the country. The disaster brought upon us in the last few years can never be made up for by any improvement people gain by these methods. If we were to indulge in any more industrial disputes this country would probably not survive economically. The result would be a far greater disaster than any sacrifice anyone in this country will be asked to make in the next few years.
I hope, therefore, that when legislation on restraint of incomes is introduced it will be accepted in good will and good reason based on intentions by the trade union movement and the workers of the country. The workers with whom I come into contact recognise that this is necessary. They recognise that we must get out of this difficulty and they recognise that we cannot increase wages unless production is increased. This legislation will tie increases in wages to increases in productivity so that we shall be producing more with less labour. Then the chances are that we shall make greater progress.
My experience over many years has been that we could get co-operation of the workers and employers, if we could get rid of antagonism between workers and employers. If we could get co-operation of the workers in increasing productivity we could solve a great many of these problems without many of the sacrifices which are being asked. The difficulty in a class society is when we have rivalry of income between dividend earners and wage workers. The workers fear that they will be worsened by sacrifices and that makes co-operation exceedingly difficult. Nevertheless, I commend to the Secretary of State for Economic Affairs that if this climate of co-operation could be introduced many of the problems would disappear overnight.
I do not want to prolong this discussion—many hon. Members want to speak—but I wished to congratulate the Chan

cellor on having tackled this matter. If he had not done so the Government would not have been forgiven. If he had done only half the job, we would find ourselves back in the same position next year. I hope that he has tackled it sufficiently to ensure that the difficulty will be overcome and that this country will move into a situation where there will be a great increase in our well-being without increasing our liabilities at home and abroad.
Productivity is a great outlet for this, but it takes time. We are going into the scientific age and there must be great inconvenience to people who are having their normal way of life disrupted by having to learn new occupations. But, after all, change is a necessity of progress and there can be no change in such an enormous industrial and technical revolution without inconvenience to a great many people.
This Government have done great things to minimise that inconvenience by wage-related benefits, redundancy payments and by shading off change so that new industries can replace older ones which are declining. This cannot be done perfectly, but the Government are to be congratulated on their success so far. The right hon. Gentleman the Leader of the Opposition rather sneered at the former Chancellor of the Exchequer for having said, "Steady as we go". I believe that this is a valuable motto, because if we can proceed steadily on this course instead of by jumps and starts, people will fall in with the necessary momentum and we may be able to march forward instead of jumping backwards and forwards. Too many steps forward and back, too savage pressure on the accelerator and then a stamping on the brake, causing violent stops and starts, dislocate for everybody the possibility of planning. Therefore, the more soundly all this can be done the better. I believe that this Budget, though it may appear to be savage in total amount has been wise in spreading the burden so skilfully over so many sections of the population so that no one will feel unfairly dealt with. Everyone knows that if he is bearing a sacrifice others are doing the same; and I am sure that people will readily accept these sacrifices if they know that this will solve our problems.

6.32 p.m.

Mr. Henry Clark: We have now had this Budget about which we have heard so much in past months, and a dull and dreary one it was. The question the House will continue to ask during the next three days of debate is: how far does the Budget we have heard today actually go to the root of our economic debility and how far is it simply a palliative to the economic disease and its symptoms? Does it really put a knife to the economic cancer which the country suffers? Frankly, I do not believe it does. The basic and supreme problem of this country and of most other countries in the world is a crisis of over-consumption, a continuing and snowballing crisis of over-consumption; and the Government are the greediest of all consumers.
The crisis of over-consumption is simply the rational outcome of the policies applied in the 1930s to solve the problem of those days, which was the problem of under-consumption. Through welfare benefits the State has insulated a large section of the community from the ebb and flow of the business cycle so that spending continues, as was intended when the Welfare State was introduced, in good times and in bad. But this in itself tends to create over-consumption. Equally, if we are to talk of cost-effectiveness there can be no doubt in anyone's mind that blanket social benefits are about the least cost-effective way of solving the wants of man.
The right hon. Gentleman the Prime Minister spoke the other day of the rising social wage and holding back personal cash wages. I believe he would have satisfied the demands of the country very much more if he had held back the social wage for a time and allowed people to earn a little more cash wages, at the same time making quite certain that the really needy people got the aid they so badly needed, rather than strewing money about, in many cases among people who do not make the best use of it and do not have the greatest need for it.
The problem of over-consumption, the problem of this and almost every other country in the world, has been added to immensely in the private sector by the growth of the whole system of marketing. Advertising and sales today are so large

and so pervasive to every aspect of daily life that they dwarf every effort made in sales and marketing in the pre-war period. Added to this, credit is not now the privilege of the upper income group. Credit, in one form or another, is available to every adult in the country and to a great extent also to teen-agers. With the blandishments of marketing and salesmanship and the availability of credit, far too many people in this country live year after year beyond their income.
It is only too easy for any family to have a slightly larger hire-purchase account outstanding at the end of the year, to have a slightly larger total of tradesmen's bills at the end of each year or to have a slightly larger overdraft. More and more people do that every year and I believe a very considerable percentage of the people of this country never save money but, in fact, dis-save it year by year, relying on rising inflation to keep their heads above water.
Certainly, in the last 10 years the best thing one could possess were debts, because the bigger they were at the beginning the smaller they were at the end as inflation cut away their value. I do not believe that the right hon. Gentleman the Chancellor of the Exchequer in his Budget has tackled any of these serious aspects of over-consumption which is the basic problem of the country today.

Mr. Alfred Morris: I understand that the hon. Gentleman is arguing that the main problem is over-consumption. Is he aware that it could be argued that there are very heavy taxes on consumption in this Budget? I am not quite certain whether he is arguing for even greater taxes on consumption.

Mr. Clark: I am grateful to the hon. Gentleman for letting me know his doubts, but if he will allow me to develop my argument I believe he will see the point I am trying to make. I fully accept that the Chancellor of the Exchequer has taxed consumption very heavily; but it has always been taxed heavily. But one of the factors on which he must calculate is how far those taxes on consumption are going to reduce the amount saved out of private income by the population. It is noticeable that since 1964, as taxes have risen so the percentage of personal income saved has gone steadily down.


We have now reached the frightening position where this country has a lower rate of personal savings than almost any of our great contemporaries in the world. The calculation is that we are now saving about 5 per cent. of personal incomes; and as a result of the Draconian taxes brought in by the Chancellor of the Exchequer today we could well see that figure going down to 4 per cent. while countries like Japan, the United States of America and Western Germany have rates of personal saving in the region of 8, 10 and even 12 per cent.
I do not believe that this Budget will do anything to help to increase personal savings, apart from the few words which successive Chancellors of the Exchequer always say about the National Savings Movement and a slight increase in sales of National Savings Certificates, which are always much more useful to those who pay heavy rates of tax than to the ordinary working class who buy them and who would be better off putting their money elsewhere. Again, the Chancellor of the Exchequer in his Budget has increased the odium of unearned income. I should like to see in the Budget some provisions making unearned income, in reasonably small quantities something at which every family should aim. I should have liked the Chancellor of the Exchequer to have said that the first £100 of unearned income for everyone over the age of 60 should be tax free. That would be a target for which every family in the country would be prepared to save.

Mr. Ted Leadbitter: Would the hon. Gentleman tell us how he thinks every family in this country could save out of unearned income?

Mr. Clark: I am delighted that the hon. Gentleman raises that point. If a reasonable system of tax-free saving is developed there is no reason why any family should not, in the course of the working life, or in fact in far less time, put by £2,000. That sum will produce unearned income of rather more than £100, and I should like to think that people who have worked and saved through life to build up capital should enjoy that money tax free. To carry the point further, as well as giving incentives on £100 of unearned Income Tax free or income from savings tax free for

everybody over 60 at a cost of £25 million a year, why should we not accept a much more positive incentive to save, as positive an incentive as there is in West Germany and America?
Why not have full tax rebate on all savings, or, at least, savings up to 10 per cent. of income? There is a different principle, I know, but why cannot the Government follow the pattern which there is for covenanted subscriptions to charity? If one gives a £57 subscription to a charity, the charity gets the rebate of tax, and one gets the credit for £100. I believe that if one could make a covenant with one's bank manager—or to a unit trust—so that he could claim back the full amount of tax, it would be a far more positive incentive, than one's tax bill being reduced at some future date. I believe that there are many people who would make covenants to save £50 or £100 each year for seven years and who would hold their money for those seven years if they could claim and take up the full tax rebate. This might put savings back into fashion again.
The Chancellor mentioned that if every working man in Britain saved I s. a day there would be £400 million not being spent; there would be £400 million additional savings. I believe very sincerely indeed that if the right and positive incentives were given it would not be necessary for the Chancellor to take £600 million or more out of the economy by taxation. If he were to give the right incentive, and gave the National Savings Movement something worth while selling, I believe we could raise our rate of personal savings and reduce the necessity of Budget surpluses year after year, and we could raise our savings to the kind of level of savings which Germany and America have achieved. There is no reason why we should limit our aim only to the level achieved in Germany and America. I believe we should well aim at a rate of personal saving of 14 per cent. Without going into great detail now, I believe that if the incentives to saving were designed carefully, they could be adjusted upwards and downwards just as the regulations governing hire purchase are adjusted. Applied to savings, that would be an extraordinarily valuable regulator of the economy year by year.
The Chancellor has missed a very great opportunity, not only to give incentives


to make people save an extra £400 million or £500 million this year, but also to restore to the British people the idea that hard work and thrift are the way to future wealth. If we could restore that idea we would be beginning to get the right moral and right psychological background needed to make this a wealthy, prosperous nation.
I have only one other point which I must make. The Chancellor is putting a tax motoring as though the motor car were the emblem of the affluent society, but this tax will hit very hard indeed workers who, in my constituency, motor 30 or 40 miles to and from their work and who can only just afford their cars.

Mr. Arthur Lewis: The best way out of the difficulty is not to pay it. That is what thousands are now doing.

Mr. Clark: I do not know what tax avoidance system the hon. Member is suggesting, but certainly the £25 vehicle licence and 4d. on petrol is a very severe burden to the man who drives, winter and summer alike, early and late, to and from his work in some obscure part of the country—the only way to get employment for many in Northern Ireland.

Mr. Arthur Lewis: There are thousands upon thousands of motorists who are not paying the tax, and this Government have refused and are refusing to do anything about it. I was suggesting that if everyone were to refuse to pay the tax, then this Government might do something about it.

Mr. Clark: The hon. Member is making his own point, but I hope he is not suggesting that thousands and thousands of my constituents are so dishonest as not to pay the tax they should.
However, the Chancellor certainly will be remembered as the man who made the motor car not a pleasure but a very considerable burden.

6.45 p.m.

Mr. Ted Leadbitter: During the day there must have passed through the minds of many Members of this House the need to take great care, because not only are the people of this country watching us but, because of the incidents of the last weekend, people in

many parts of the world are also watching the happenings here today. Therefore, it is very important that contributions to this debate shall seem to be constructive ones which reflect stability of mind and careful scrutiny of the Chancellor's statement, so that we do not fall away from the important lesson that we should not make statements which do not reflect well upon this House and the country.
It appears, however, that a mistake has already been made. I was rather appalled that the right hon. Gentleman the Leader of the Opposition spent most of the valuable time afforded to him in the special, privileged position which he has, in possibly persuading some elements outside this House—certainly none on this side of the House—that there was a kind of by-election on: and, therefore, he was deliberately avoiding the main issues to which the Chancellor directed himself over a period of two hours. It seemed to me that the mistake which the Leader of the Opposition made was that he was trying to play to some kind of gallery and not addressing himself in a responsible manner to what was the most important Budget speech since the war. We back-benchers have a major responsibility to avoid that bad example by the Leader of the Opposition.
At the same time, I think that we on this side of the House must state quite clearly and honestly that we are aware that this Labour Government have made mistakes. It would be a very sad thing in a democracy if we had a Labour Government so arrogant, as it has ofttimes been suggested that they are, as to assume to themselves perfection against the background of economic difficulties, which they inherited. It would not be proper for me now to rehash the arguments about the circumstances which persisted before 1964. Repetition only bores the House. I think it sufficient to say that we, Members of Parliament, privileged to come here to serve in this House, must accept that we in this country have unique problems, problems which confound the best kind of brains; not because they are insoluble but because they are problems arising out of our democratic insistence of preserving wherever we possibly can areas of liberties and freedom which have been sought


and preserved through instruments such as this House and other political institutions and organisations. Yet they themselves contribute, by their insistence on liberty, to the kind of economic problems which we have.
The will to do what one likes is inherent in the British character. We fight against such things as taxation, rules and regulations. They are an anathema to us, in terms of the freedom that we have always fought for. Nevertheless, they are part of the problem, and because the problem exists we must say quite clearly that we are satisfied that whereas the Labour Government have made mistakes they have tried to attack these problems in a more militant and active manner than have any Government since the war.
In so doing, we have had to face great difficulties. No one can claim that the consequence of the seamen's strike was a matter of small account; it was a major problem that we had to face. In the exercise of the freedom and liberty to which I have referred a long time had to pass before the strike came to an end. It cost us a great deal of money.
The second most important event that militated against the efforts of the Labour Government was the dock strike. Strange to say, in a climate where the Labour Government had produced legislation getting rid of the worst aspects of dock employment we had to wait a long time—again addressing ourselves to the principles of freedom and liberty—for time and discussion to bring about a useful end. Again, it cost us a great deal of money; indeed, it cost us far more than we have been able to evaluate even to this day.
The third most important event was the Middle East war. We were not responsible for that, but again, in the interests of freedom and liberty, and to try to introduce a degree of sanity into this highly inflammable part of the world, Great Britain had to take the lead in discussions and in making representations to the United Nations. Even to this day it is costing us money. I calculate that the closure of the Suez Canal is costing us about £1 million every day, and that in total, since June of last year, it has cost us £150 million or more.
It is against that background and the background of the happenings of the past two or three days, in respect of the world monetary crisis, that the Chancellor of the Exchequer has produced a Budget of major importance. I should have thought that in that context the Leader of the Opposition might have changed his tactics and indicated the support of his party, in the interests of the nation. It may be of interest for hon. Members on both sides of the House to reflect on what the Conservatives will do when we vote on the Budget. Then we will see how their actions support the speech that we have had from the Leader of the Opposition.
Many hon. Members will welcome the fact that the Chancellor has found it in his heart not to increase the duty on beer. Hon. Members on this side of the House also welcome the fact that there is no change in the standard rate of Income Tax. In the present circumstances of the country many people will say that in these two matters the Chancellor has acted wisely. For a great section of our community—the old-age pensioners—the raising of the age exemption from £401 to £415 for single persons and £643 to £665 for married couples will be very welcome. Those of us who are more fortunate were glad to hear the Chancellor's announcement.
We are pleased that the principle of the family allowance has been settled, namely, that the net payment will go to those families in greatest need through the instrument of drawback on the Income Tax allowance. Nevertheless, bearing in mind that many young people want to set up home and need to spend considerable amounts of money on clothing and furniture, I am disappointed that the Chancellor felt that he ought to raise Purchase Tax from 11 per cent. to 12½ per cent. This seems of small account, but the need to find small amounts of money can create great difficulties for those in the lower income groups, and even those outside those groups who are facing the great expense of setting up home.
As a Member of the Standing Committee considering the Transport Bill, I am of the opinion that, that Committee having spent many nights—about 92 hours in dealing with 40 Clauses—

Mr. Speaker: Order. This is a wide debate, but not so wide as to include the Transport Bill.

Mr. Leadbitter: With great respect, Mr. Speaker, I was looking for some personal relief. The Chancellor has in-cheated that the introduction of his new measure means that some provisions of the Transport Bill are being withdrawn.
My right hon. Friend was rather hard on the motorists. They have been punished for a long time. Not only the Minister of Transport has been after them; everybody seems to be trying to get the most out of them. I should have thought that the Chancellor could have arrived at a compromise in respect of the vehicle excise licence and raised it to £20 instead of to £25.
There are two other matters which the House might dwell upon. First, we should consider the advisability of the 50 per cent. increase in Selective Employment Tax. Although it is a fact now, since the Chancellor has made his statement, we must take great care to see what the incidence of the tax is on the distributive trades. I hope that the Minister can assure the country that there will be a continuing examination of the incidence of this tax, so that we can use it to the best advantage.
I am pleased that my right hon. Friend has decided to impose a one-year annual wealth tax. This balances things up for us. On that joyous note, I hope that the Minister will take into account the fact that although at this stage we cannot assess what the Chancellor's statement means, it is necessary to watch with the greatest care what its incidence will be on the lower-paid worker. If we cannot have a £15 low-paid margin, let us see what happens to those who are earning less because of this Budget.

6.59 p.m.

Mr. John Lee: One of the advantages of a very long Budget speech is that it empties the Chamber so thoroughly at the end of the day that back-benchers like myself who want to speak before the experts, the big guns, go to work the following day have a chance to do so.
A number of proposals in the Budget will command a wide measure of respect on this side of the House. I think that all of us welcome the family

allowance proposals. On balance, although there will be individual items that can be criticised, the Purhase Tax changes—

It being Seven o'clock, and there being Private Business set down by direction of The CHAIRMAN OF WAYS AND MEANS, under Standing Order No. 7 (Time for taking Private Business), further Proceeding stood postponed.

BIRMINGHAM CORPORATION BILL (By Order)

Order for Second Reading read.

Motion, made, and Question proposed, That the Bill be now read a Second time.

Mr. Speaker: May I say one word about the order of our proceedings. We shall come to the Instruction when we have dealt with the question of the Second Reading.

Mr. Julius Silverman: Does that mean, Mr. Speaker, that you propose that there should be a separate debate on the Instruction?

Mr. Speaker: What will happen is that we shall just dispose of the question of whether the Bill be read a Second time or not. If the Second Reading is carried, I shall call upon the hon. Gentleman to move the Instruction.

7.1 p.m.

Mr. Reginald Eyre: Because of the circumstances at this time, I shall speak as briefly as possible in support of the Bill. Anyone who was in Birmingham during 1940 and 1941, which were years of severe trial, will know that one of the virtues which receives immediate recognition in the city is that of fairness. In my belief, the true native of Birmingham has an inherent desire that "fair do"s as he calls them, shall prevail.
That fundamenetal wish for fairness leads to an unwillingness to accept that people in genuine need should be divided into two groups and that one of the groups should be preferred while the other, equally deserving and equally in need, should be neglected. The Bill is intended to put right an unfairness of that nature. It has been championed from birth by Alderman Frank Griffin, the leader of


the Conservative controlling group on the city council, and I am happy to say that it has also won the support of Alderman Sir Frank Price, the leader of the Labour group on the city council.
When the principle of the Bill was first considered in the council chamber 141 members out of a total of 156 on the city council from all three parties voted in favour of the Bill, and no one was against it. Naturally, the Bill received wide publicity in Birmingham, and at a town meeting called specially for the purpose it was approved by 109 votes to eight. I understand that those who spoke against the Bill on that occasion indicated that their loyalty was to the Communist Party. Therefore, it can be said that the Bill has wide and general support in Birmingham, where it is appreciated that it can assist in dealing with a practical problem which is seen to exist now within the city.
The object of the Bill is to authorise the Birmingham Corporation to make payments out of the general rate fund to tenants of privately-owned dwellings similar in scale to the rent rebates which have been granted to municipal tenants for a number of years. By giving equality of treatment to both groups of tenants in this way, the Bill corrects an injustice and offers relief to some tenants genuinely in need.
The Bill provides for this to be done for private tenants in a way which precisely matches the fair and effective rent rebate scheme applying to municipal tenants. Clause 3 provides that tenants to whom the payments may be made are all tenants in occupation of dwelling houses in the city, and the definition of dwelling houses includes flats and parts of buildings used as separate dwellings. The first major exception is, of course, Corporation tenants, who already have the benefit of their own rent rebate scheme. The other major exclusion is of tenants of dwelling houses with a rateable value exceeding £110, which is approximately the upper limit of the rateable value of municipal tenants, so that privately-owned dwelling houses above that rateable value are excluded. That maintains the principle of parity between private and municipal houses.
Two other small groups are excluded—those with service tenancies and the

tenants of housing associations and societies. This is for technical reasons which would lead to administrative difficulties. It is also regretted that administrative complications prevent the extension of the scheme to owner-occupiers in poor financial circumstances.
The Corporation's present scheme assesses the gross income of the tenant and his wife and a net rent for the premises. A rebate is allowed equal to the amount of the net rent which exceeds one-ninth of the net income, though the rebates are gradually phased out if the tenant's income exceeds £15 where there are no children, or where the income is greater than £17 if there is one child, or greater than £18 where there are two or more children.
The calculation of payments to be made from the General Rate Fund under Clause 5 is required to be carried out in the same way as now applies to rebates to municipal tenants. Assistance is given only in respect of a fair and reasonable rent paid by a tenant for his accommodation. Where the rent has been fixed under national legislation—for example, by the rent officer in the case of unfurnished premises or the rent tribunal in the case of furnished premises—the rent so fixed will be used unless the actual rent is less. In other cases, a rent equal to the sum which would have been payable had the Corporation been landlords and fixed the rent in accordance with the current level of council house rents will be adopted if that is less than the actual rent paid.
It is believed that the scheme will be particularly useful for meeting cases of hardship existing at a level a little above that specified for help from the Ministry of Social Security. Cases within the Corporation's knowledge include hardship arising as a result of long periods of sickness. Sometimes the rebate is the only means by which a tenant in certain circumstances can be kept in his own home. The eviction of the family for rent arrears causes social disaster. The consequent expense of care of children, of temporary housing and welfare assistance in those cases falls heavily on the Corporation, and an effort to keep a roof over the family's heads in such cases is often a good investment for society as well as a very human act.
There are penalties in Clause 6 for mis-statement of cases.
With regard to the administration, it is thought that only 6 per cent. of those tenants qualified and entitled under the Bill will, take advantage of the scheme. The administration of the municipal tenants' estates has given the Corporation good experience, and its expectation is that the cost of the rent rebate scheme affecting private tenants under the Bill will be about £200,000 a year, equivalent to a ld. rate. Apparently the Id. rate now yields about £205,000 in the City of Birmingham.
It is thought in Birmingham that social justice and prudence well merit this expense to be borne by the General Rate Fund. It is believed that the Minister of Housing and Local Government will take a neutral position on the Bill. But all parties in Birmingham want it and I hope that the Minister will bear this in mind in the advice he gives to his hon. Friends. I ask my hon. Friends to give the Bill their support and I hope that it will have a successful passage.

7.11 p.m.

Mr. Julius Silverman: It is my intention and, as far as I know, that of my hon. Friends to support the Bill. Certainly my colleagues from Birmingham will support it. We will deal with the Instruction later on. As the hon. Member for Birmingham, Hall Green (Mr. Eyre) has said, the Bill has received the support of all parties in Birmingham and I believe that, in matters of this sort, it is for the citizens of Birmingham, through their elected representatives, to decide how they wish to spend their money. Some may argue that this should be a national matter but if Birmingham has so decided, then it should be allowed to do it.
There is no doubt that the Bill can have some very useful consequences for non-council tenants. At present, there is inequity between non-council and council tenants in that council tenants can get rebates and non-council tenants cannot. In that respect, the Bill puts the matter right. Indeed, it does more—it swings to the other extreme.
Although we support the Bill, we have certain reservations which must be expressed. This is an experiment, a private scheme. We shall have to see how it works, and a number of us have doubts about it. First, what effect will it have

upon rents generally, which is extremely important? Many housing experts believe that if, in a free and uncontrolled market, we give an additional subsidy to tenants to pay in rent, the consequence is a tendency to increase the level of rents, in that landlords can ask for more and there is more demand for their houses from people who otherwise could not afford them. It may be said that now we have rent regulation and control but I want to analyse the position in Birmingham.
There are about 50,000 privately-rented dwellings in Birmingham which might come under the scheme. Of these—and these figures are bound to be something of a guess—about 16,000 are rent-controlled properties under the Rent Act, 1957. The Bill cannot put up the rents of these properties so long as the existing tenants remain in them because they have rigidly controlled rents. I have no fear for them. For the others, I would assume that, in view of the moderate nature of their rents, they will receive little benefit from the present scheme.
Apart from that, it is estimated that there are about 25,000 other rented properties coming under the £110 rateable value limit and which would come under the heading of regulation. The number of registered rents is 890, which means that only about 4 per cent. of the houses concerned have regulated rents. The rest some under regulation in that the landlord theoretically cannot put up the rent. But I am afraid that the consequence of this Bill, to some extent at any rate, by putting up demands and increasing the amount of rent a tenant can pay, will be that landlords will be able to take advantage of it.
Even with the 890, it is estimated that the general level of rent is about 2·2 gross value, and this surely means that, with rents which have been decided by the rent assessment committees in Birmingham, which have set the pattern of the rents generally at about three times the 1957 controlled rent—in my view, this means a very high rent indeed—scarcity value has not been excluded.

Mr. Harold Gurden: Has the hon. Gentleman included in these figures multi-occupied houses, flatlets and the like?

Mr. Silverman: There would be some flats in this. Self-contained flats would come under the old Rent Acts, although this Bill goes wider than that. But I am dealing with 25,000 dwellings which would come under the heading of regulation. These include a certain number of flats. Their assessment is substantially higher than that of houses but, on average, 2·2 is a fair average from the figures I have been given recently, and it is fair to say that these rents have increased three times since 1967 and that scarcity value has not been excluded.
I do not necessarily accept that rent regulation will stop a rapid increase in rents, and the position needs watching. The rent officers take a different view. Their decisions have been upset in many cases. The committees have increased the rents set by the officers in 90 cases and in nine cases have decreased them, which means that they have imposed a somewhat higher level. It would be out of order to discuss in detail the effects of the Rent Acts, however. But I do not take the pessimistic view that the whole of this rebate will go into the pockets of the landlords, although I am certain that some of it will go there and this point must be carefully watched. That is my first reservation.
There are one or two other matters of detail. The Bill is very wide. It deals with furnished dwellings and even with furnished rooms. Apparently, the basis upon which a valuation or assessment will be made in these cases is by deduction of the value of the furniture, together with garage and other matters, and by making an assessment on suitable Corporation property. I imagine that, as far as furnished rooms are concerned, the benefit to the tenant will be small in view of the assessed rent, which is what matters. Whatever their rent, the Corporation assessed rents are probably lower.
I do not know how the rent will be assessed. I presume that it may be done on the overall basis of council valuations which is 1·5 per cent. of G.V. It seems that in a large number of cases new individual assessments will be made. Where there is no separate rateable value this will be an additional burden for the staff, either of the housing department or another department. One point that I hope the Committee will consider is what

this burden would be and how it would be administered and whether staff will be available. If the whole of the 50,000 had to be assessed by inspection from the Birmingham Housing Department this would place a completely intolerable burden upon the staff.
I presume that in a large number of cases they will operate upon the 1·5 per cent. of G.V. basis. Even so, there would be a large number of dwellings which do not correspond to this. Another problem is the definitions in the Act of a separate dwelling. I notice that the question of having a joint kitchen does not exclude premises from being separate premises under the Bill. Members may know the case of Neale v Del Soto which is the major case on deciding what is and what is not a separate dwelling.
There the question of a joint kitchen was the major point in deciding what is a separate dwelling. What the position will be when this is eliminated, I do not know. I can see some legal headaches in the Town Clerk's department about a large number of dwellings, in deciding what is and what is not a separate dwelling.
My major reservation deals with the relationship between council tenants and non-council tenants. I will not develop this now, except to say that this Bill places another burden on council tenants who will be in the position of paying through the rates for non-council tenants, and through the rents for council tenants. I shall elaborate on this later. For the present, I support the Bill, notwithstanding my reservations, and hope that the House will give it a Second Reading and that the Committee will consider the various matters of detail which I have raised.

7.23 p.m.

Mrs. Jill Knight: There are very many people in Birmingham who would like a council house or flat, but because they are in privately rented accommodation they might just as well cry for the moon. All of us who represent Birmingham constituencies get letters from people telling us that they are in a private house and saying, "Please can you do anything to get me into council accommodation?". In many cases the accommodation provided by the Birmingham Corporation is


infinitely superior to some of the privately rented accommodation.
As we all know, there is no hope of getting into a council house, maisonette or flat if a person is already in privately rented accommodation. One of the sad and unjust things about this is that the private accommodation rent is often decisively steeper than council rent. There is a double burden, because if these people were in council accommodation and were hard up they would be given some help, whereas they get no such help in privately rented accommodation.
The point of the hon. Member for Birmingham, Aston (Mr. Julius Silverman) about rents being put up by private landlords if the Bill were passed is interesting, but I am not sure that it is valid. In the first place, the Bill certainly has not emerged in a thoughtless and haphazard fashion from Birmingham Corporation. I am certain that the Corporation has studied every aspect very carefully. I am equally certain that such a possibility will not have escaped it. It has obviously weighed the matter up very carefully, and come to the conclusion that this is unlikely to happen or, even if it does, the obtaining of fairness for these people must override the point.
I suppose that the same point could be made about tenants in council accommodation who apply for supplementary pension. It has been possible for many people on assistance to get help with their rents if their income will not meet it, and one might as well use the same argument for the supplementary pension, that, if this were payable, the landlords would put the rents up. We should put that argument out of our minds. If we are to take any notice of it at all we can only do so at the expense of providing fairness to these people, as the Bill seeks to do.

7.27 p.m.

Mr. A. H. Macdonald: I hope that the House will forgive a non-Birmingham Member for speaking in the debate. It is right that the elected representatives of Birmingham should be in the forefront of the debate, but I am sure that the hon. Member for Birmingham, Hall Green (Mr. Eyre) will agree that there is a principle involved which is of interest to hon. Members from other parts of the country. The local authority in my

own constituency does not make a rent rebate scheme out of the rates to anyone. From time to time the suggestion is made that it should make it to municipal tenants, and I can see the objections and difficulties that arise and the element of unfairness to which the hon. Gentleman alluded in his introductory speech.
Is it possible that we are just shifting the element of fairness just one step further? The Bill proposes that private and municipal tenants shall be dealt with on the same footing. I can see the fairness in that, but owner-occupiers, to whom the hon. Member referred briefly, will be in a worse position. He referred to the technical reason why nothing could be done, but I hoped that he could have said a little more.
The principle involved is naturally of great interest to all hon. Members and it is impossible for a London Member not to notice how the Greater London Council, faced with an identical situation, has adopted a directly opposite approach, namely to withdraw facilities from the municipal tenants. It would be out of order to dwell on this, but I wonder whether the Minister would care to venture any comment about the extension of the principle underlying the Bill to other parts of the country. Does he think it appropriate for other authorities to follow Birmingham's lead? Having read the Bill and listened to what the hon. Member has said, if I had been a member of Birmingham Council I, too, would have supported the Bill.

7.30 p.m.

Mr. Graham Page: I want to intervene very briefly in favour of this Bill. First of all, it is worthy of comment that the House can pass so rapidly from a great national debate to a debate upon a local Bill. We see this daily when we have the half-hour Adjournment debate at the end of the day. This characteristic of the House has been highlighted today by the passage from the Budget debate to a debate on the Birmingham Bill.
My hon. Friend the Member for Birmingham, Hall Green (Mr. Eyre) had admirably and lucidly explained the contents of the Bill. The hon. Gentleman the Member for Birmingham, Aston (Mr. Julius Silverman) has assisted the House with a clear exposition of the facts as


they relate to Birmingham. The most important thing for the House to note is that on the two statutory occasions when the Bill came before the Birmingham City Council not one vote was cast against the promotion of the Bill. There is a substantial representation of at least two of the parties and a small representation of the third party on that Select Committee considering the Bill, and one might have expected to have a little difference of opinion. In addition to that, at the town's meeting the vote in favour of the Bill was 14 to 1, as I understand it, and no petitions have been presented against the Bill.
Locally, the Bill finds favour and the House will not throw out a Bill in those circumstances. There is no minority interest which the House ought to seek to protect; there is no great principle of general law which the Bill is threatening to breach and which the House ought to uphold. Rebates of rent to those in need are recognised as laudable, and if Birmingham feels it can extend those rebates from council tenants to private tenants then that too is laudable.
The fears of the hon. Gentleman the Member for Aston, about a general increase in rents as a result of this Bill are unfounded because of the admirable provisions in the Bill relating to rent regulations. I am sure those provisions will take care of the worries he had.

Mr. Julius Silverman: I am sure it will be borne in mind that, as far as the rents capable of coming under regulation are concerned, 96 per cent. of those are not at the present time registered rents and there is no provision in the Bill that the tenant must go to the rent officer to have his rent regulated.

Mr. Page: There is the assessment by the Corporation and the Corporation itself concerns itself with the question of the size of rents. The tenant can go to the rent officer to have his rent regulated. I would have thought that not only could the House accept the principle of the Bill, but it could accept there are all the safeguards in the Bill which one would expect to find in an experiment of this sort. I hope the Parliamentary Secretary will be able to give it his blessing from the Government Front Bench.

7.34 p.m.

Mr. Christopher Price: I, too, would like to join the hon. Member for Birmingham, Aston (Mr. Julius Silverman) and other hon. Members who have given their general support to this Bill, but I sound a note of warning in two directions.
It has been said by the hon. Member for Birmingham, Hall Green (Mr. Eyre) and by the hon. Member for Birmingham, Edgbaston (Mrs. Knight) that this Bill corrects the inequity between private and municipal tenants. The true position is that the entire rent system is riddled with inequities of all sorts, both among private tenants and municipal tenants, and, if one goes further, among people who are buying their own houses or renting furnished rooms. I do not think one ought to herald this Bill as solving the problem once and for all. If it works well it may, roughly, correct an inequity, but there are many other inequities which still exist. Very great inequities exist between tenants of new municipal houses and old municipal houses, who pay very different levels of rent for not very different standards of accommodation. Inequities exist between controlled and non-controlled tenants—one could extend the list.
This is a rough and ready Measure rather than a Measure which can be expected to introduce any exact equity into the situation. It is in this spirit that we will be speaking when we come to the instruction later on. I would also emphasise that there is, I think, a very real danger of this Bill ending up, not this year or next year but, if the situation develops, for a considerable period of years, simply subsidising the private landlord.
I have never felt that housing is a suitable medium for the mechanism of the private market. Admittedly, we have private tenants, and I accept the fact that this Bill is an effort to deal with them, but I have never felt that private housing was desirable. If we are introducing a Bill which allows subsidies to go towards private tenants we have to be very much more careful and far more vigilant when this Bill comes through than we need to be when general housing subsidy bills go through in other circumstances.
If one inadvertently subsidises the landlord when the Corporation is the tenant


no great harm is done, because the money passes from the community nationally to the community locally. There have been great disputes about this in the past. The predecesors of the Ministers of Social Security and of Pensions were very chary at one time of allowing supplementary benefits for supplementary rents if a council practised what they at that time called "discrimination". In other words, if they tried to make people go to the Ministry of Social Security, and if they would not, then they were paid a rebate. At one time, it was felt councils should treat all their retired people, for instance, in exactly the same way. This is no longer the case. The Ministry of Social Security have no objection to subsidising Birmingham Corporation for some of their tenants in terms of supplementary benefits, but I think we have to have far greater vigilance if there is any danger of subsidising private landlords in this way. It is all very well saying that the Corporation's valuers, and the Corporation's Estates Department, have control. I agree the Bill does give them control. Of all the semi-learned professions, I have always thought the profession of valuation quite the most difficult to understand, thy: most vague, and the most liable to produce glaring anomalies in what is quite a small area.
I welcome the Bill as an attempt to produce equity between two classes of citizens in Birmingham. We would be wildly over-optimistic if we expected it to do any more than roughly correct the balance. There is a great deal more to consider when we come to the instruction later on.

7.40 p.m.

Mr. Victor Yates: Some of my hon. Friends may have fears which are not entirely justified. Speaking as the representative of a constituency with a large number of municipally and privately rented houses, I have always felt that it is unfair that a person living in a privately rented house should not have the same advantage as the person living in a municipally owned house. I have had numbers of people come to me asking about their rents and how they can get relief. People do not appeal for assistance usually unless it is really necessary, and they have to seek national assistance before they will come for benefit in this way.
Whereas later we may argue whether there are any fears in this connection, a scheme is vitally important for those who live in private houses. If we can get some assurances on this matter later on, the Bill has my support. There are many thousands of tenants in private houses who should be able to get some relief. On behalf of those people, I welcome the Bill.

7.42 p.m.

Mr. Frank Allaun: As will be apparent from my accent, I do not come from Birmingham, and I hope that I shall not be regarded as an intruder in this debate.
There is the vestige of a national policy at stake. Just as Birmingham led the field, wrongly in my view, over the sale of council houses, it may be that it is leading the country in a wrong direction on this matter.
I share the strong suspicions which have been voiced, because there is a national clamour that rents must go up. It is not confined to property owners, because I find it even among the academics. The book by Miss Adela Nevitt deals with this theme at great length.
After decontrol, rents are tending to be trebled. It may be that this will be justified in future, if the Bill goes through, and will be extended by the argument that it will not matter if rents are trebled because the poorer tenant will receive a subsidy from the rates, as proposed in the Bill. In effect, the subsidy will not go to the tenant whose rent is increased, but to the landlord. I suspect that this will become of nationwide importance very shortly. Therefore, whilst I do not intend to intervene on this Bill, I urge my hon. Friends to notice the possible direction in which it may take us.

7.44 p.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): I thought that I detected a slight divergence on matters of doctrine between my hon. Friend the Member for Salford, East (Mr. Frank Allaun) and my hon. Friend the Member for Birmingham, Ladywood (Mr. Victor Yates), who has a very long experience as an hon. Member representing a Birmingham constituency. He thinks that there is a problem here which it is


worth seeing if it can be tackled. My hon. Friend the Member for Salford, East, on the other hand, saw it as the thin end of a wedge to provide an excuse for putting up rents.
I would not quarrel that there is a problem here. I think that there is a gap in our policy for dealing with privately rented houses, though whether it should be dealt with by having a common subsidy for all types of houses, I am not clear. It is because I am not clear about it that I welcome this Bill, if it works.
I am not in a position to offer any comment on the figures which have been quoted. They are Birmingham's figures, and presumably Birmingham knows what it is talking about, though I cannot say that its estimated cost will turn out to be right.
I approach the matter from the point of view that here is a great city with the resources to carry out such an experiment. There are not many authorities who could lightly undertake such an exercise. I do not think that there is any likelihood of a stampede of local authorities to promote Private Bills of this sort.

Mr. Macdonald: I concede that point. However, though there may not be many, the G.L.C. is one. If Birmingham is right, as I think it is, the G.L.C. must be wrong.

Mr. MacColl: That is a problem on which, happily, I am not called upon to offer my comment—in this context, anyway.
If one accepts local democracy, the value here is that a local authority, with a substantial backing of opinion behind it from both parties and from the people as well, says that it has the resources and that it wants to go ahead with it to see how it works. In such circumstances, it would be silly of the Government to try and pick holes in it and make niggling detailed points of criticism.
The proper course is to let Birmingham go ahead, if it can get the support of the Select Committee and if it receives the go-ahead in the Council chamber. We associate Birmingham with the great pioneers of gas and water Socialism and of the municipal bank. Perhaps this proposal will form the trilogy and that Birmingham will lead the way to a new

approach which will provide very valuable information from which everyone can learn. Certainly I hope that it will be more successful than has been the sale of council houses.

Question put and agreed to.

Bill accordingly read a Second time and committed.

7.46 p.m.

Mr. Julius Silverman: I beg to move,
That it be an Instruction to the Committee on the Bill, to make the exercise of any authority to pay rent rebates to tenants of privately owned dwellings out of the General Rate Fund, conditional upon rebates to Birmingham Municipal Tenants being financed wholly out of the general rate fund, so as to ensure equity of treatment for both private and council tenants.
The Bill establishes one principle at any rate, with which I agree entirely. If any rebate scheme or scheme of subsidy is to be applied to a section of the community, it should come not from just one section of the community but from the whole community. Rate rebates come from the whole community, partly the local authority and partly the Government, and the same should apply to every form of subsidy.
The principle does not apply at present in Birmingham to council tenants. Still less does it apply in other parts of the country where rent rebate schemes have been introduced which are financed wholly by council tenants. When one bears in mind that this is a sort of pilot scheme, it is of concern to other people in the country as well.
In Birmingham, when Labour was in control, a grant was made from the rates to meet the rebate scheme of £400,000 a year which, at that time, covered the cost of the scheme. During the past year, the cost of the rebate scheme has risen to more than £500,000. Next year, it is anticipated that it will rise to something like £650,000. The additional £250,000 will have to be found by other council tenants. This is wholly wrong in principle. Rebate schemes of this nature should be shared by the community as a whole. The consequence of the Bill will be that the council—

Mr. Eyre: I did not quite understand the point made by the hon. Gentleman a few moments ago when I thought he said that the cost of this scheme would fall only upon council house tenants.

Mr. Silverman: No. I said that council tenants, as ratepayers, will have to share the cost of the scheme. This means that the council tenant, as a rate-paper, is paying for the cost of rebates to non-council tenants and is paying through his rent for the cost of rebates to other council tenants. This is grossly inequitable.
Council tenants already bear many burdens. I think the time has come for the Minister to reconsider the question of council rents. Unlike the owner-occupier, the council tenant is not buying his house for himself, but for the citizens as a whole. In Birmingham at the present time about £1¼ million is being paid out of the revenue housing account for debt redemption. That is an asset which accrues to the citizens as a whole. Existing council tenants are bearing all the capital costs for new houses, and there are thousands in the pipeline. It is inequitable that in addition council tenants should pay any costs of the rebate scheme. Any rebate scheme, as a matter of principle, ought to be for the citizens as a whole.
The hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight) spoke about different levels of rent between private and council tenants. New council tenancies are by no means low. Tenancies of new houses being built today are in the region of £5 8s., and as much as £6. That is a rent burden which many people outside the range of this rebate scheme can only face with considerable difficulty.

Mrs. Knight: I agree with the hon. Gentleman that there certainly are such hereditaments, but would he not agree that these are in very much of a minority, and that the majority of rents, while not being particularly cheap, are not particularly very high? That is as the Birmingham Corporation would wish. I was not saying that rents were of necessity always cheap in council houses, but I think the hon. Gentleman will probably accept that the rents he has quoted are the exception rather than the rule.

Mr. Silverman: The hon. Lady is wrong. All new houses are being let at rents like that, and in the case of new tenancies of old houses the rents are put up when the tenants move in. I can assure the hon. Lady that this is so. This is not the exception. This is the general level of rents of new houses.

Mr. Arthur Lewis: If people are earning £65 a week, rents of £5 or £8 are not much. If they are earning between £10 and £15, £2 or £3 is a lot to pay in rent.

Mr. Silverman: If they are earning £15 they may come within the basis of the rebate scheme. But quite a number of people above the rebate scheme still find rents of this nature a very considerable burden. Therefore, to talk about the privileged council tenant today is somewhat of an anachronism—certainly in Birmingham. He ought not to bear this additional burden. The hon. Lady the Member for Edgbaston, will find that in all the new estates and in relet houses the rents are very high. Indeed, they are were being subsidised by the council in any way, one could not object to this, but he is not.
The principle of the housing revenue account being self-supporting has been accepted for many years. It was instituted when there was a Labour council. Far from being self-supporting, the council is actually making a profit from council tenants, because, as I have mentioned, £l¼ million—which in three or four years will rise to about £2 million—is being taken out in debt redemption. In a commercial company debt redemption is put on the profit account as an asset.
Apart from the other burdens which I have mentioned, I say that to put this additional burden on the council tenant is inequitable.
The promoters of the Bill have pointed out, "Well, the council tenant is different. Apart from the question of any council subsidy, there is the question of massive Government subsidies." I agree. Under the housing subsidies legislation the council housing revenue account receives much more Government assistance than ever before. What do those subsidies do? They decrease the effective rate of interest at which councils let or rent to 4 per cent. The so-called subsidy that they get is no different from that which the owner-occupier gets by way of relief from tax on mortgage interest or by way of the mortgage option scheme which is coming into operation on 1st April. It is the same sort of principle. However, no one goes to the owner-occupier and says, "You are receiving massive Income


Tax relief, Therefore, you ought to contribute to the poorer sections of the owner-occupying community." It would be wrong in principle and silly. It is just as wrong regarding the council house tenant.
The council house tenant has been the Aunt Sally of politics by some types of Tory politicians for a long time, and this should end. The council tenant is not a highly subsidised and highly privileged person. There are people in council houses who are well off where there are several income earners in one family. But by and large there are many more people with modest incomes on council house estates, and, taking it all in all, the average level is not high.

Mr. Frank Allaun: Do I understand my hon. Friend to say that the great city of Birmingham pays no subsidy out of the rates to its council house tenants? If that is the case, it is unlike many other great cities which do make big contributions.

Mr. Silverman: It does not. It makes a contribution to the 1954 Act houses taken over by the Corporation for patching up and demolishing. It pays a contribution of £400,000 towards the rebate fund. It pays, I think, £100,000—I am speaking off the cuff—towards keeping the registration list, which is not the concern of existing tenants. Towards existing municipal houses it does not pay a single penny. This is the position now of a large number of other councils. Far from subsidising, they are actually making a profit.
I was dealing with the question of Government subsidies. In that respect the council tenant is in no different situation from the owner-occupier. I think that this subsidy could be justified on the basis that it is, after all, the Government which, as a matter of national policy, decide upon a rate of interest and if the Government make that rate of interest high then they have a right and an obligation—not merely a choice, in my view—by means of subsidies to assist, whether it be the owner-occupier or the council tenant, to occupy his house at a reasonable rate of interest. Therefore I am not in the least degree impressed by this argument about massive Government

subsidies. It is the same for the owner-ocupier and for the council tenant.
I think that in order to put this on an equitable basis this Instruction ought to be accepted by the House—that is to say, that in order that there should be equity as between the two types of tenant the principle should be accepted that, just as these non-council tenants receive their rebate wholly out of the community, so this should apply also to council tenants.

Mr. Eyre: I listened with great interest to the speech of the hon. Member for Birmingham, Aston (Mr. Julius Silverman). The last two lines of the Instruction which he and his hon. Friends have put on the Order Paper are the vitally important ones, including as they do the words
so as to ensure equity of treatment for both private and council tenants.
The implication of that wording is that equity of treatment is not applicable under the Bill's proposals. I reject this suggestion.
I will not suggest that we shall reach a state of absolutely perfect fairness, which is difficult to achieve in this world, but I suggest that we should right an injustice. I submit that detailed study of the situation will show that the proposals in the Bill come very near to equity and to that extent the Instruction put down by the hon. Member for Aston and his hon. Friends is rather misleading.
At present tenants of council houses pay rates and, of course, they can benefit under the present rent rebate scheme, which has been mentioned earlier. The tenants of private houses in Birmingham at this very moment also pay into the rate fund, but they cannot benefit under the rent rebate scheme. Indeed, they have paid into this fund for years. To that extent, the rate fund has benefited, and the rate fund has been used to subsidise municipal tenants. This has gone on, year after year, for many years. We are therefore righting an inequity by saying that now the tenant of the private house paying into the rate fund, if his needs justify it, shall be entitled to get this benefit.

Mr. Julius Silverman: This has been settled by the House.

Mr. Eyre: Yes, but it seemed to me necessary to go over this basic principle


because I think it is very relevant to the suggestion in the last lines of the Instruction—
to ensure equity of treatment for both private and council tenants.
It is my submission that we do that under the proposals.
In his speech the hon. Member raised a number of complicated matters which we cannot pursue in detail tonight, but I would like to say that there is no question of the Corporation's making a profit out of council tenants because, owing to the very heavy rise in interest rates, there is expected to be next year a deficit of about £1 million in the housing account, and this is a heavy responsibility which the city as a whole has to consider as well as the municipal tenants involved.

Mr. Christopher Price: Is it not in exactly these circumstances of placing even greater burdens in the future on the body of municipal ratepayers that the inequity which my hon. Friend mentioned, if this deficit is looming ahead, might grow far worse?

Mr. Eyre: We are confused by the hon. Member for Birmingham, Perry Barr (Mr. Christopher Price) when he talks about placing this burden upon the tenants of council houses. This is simply not an accurate statement. The burden is being placed upon the general body of ratepayers, which includes the tenants of private houses and municipal houses, owner-occupiers and all the ratepayers in the city. So it is wrong and misleading to assume that this burden is to be thrust only upon the municipal tenants. It would be inequitable if that were so, but it is not so.
Equity can be achieved under the present Bill because the same procedure will apply to both groups of tenants, and I would emphasise that the rebates and the calculations for rent are exactly the same for both groups. Looking at the respective numbers in the groups and considering the objections raised by the hon. Member for Aston, it is interesting that three times as many council tenants are paying less than half of that from which they can potentially benefit. If one looks at the number of council tenants and the number of private tenants—150,000 of the former as compared with 50,000 private tenants—one finds that the council ten

ants are paying in a sum which is less than half that from which they can benefit.
The sum from which they can potentially benefit is the £400,000 which is now available and which is used to benefit council tenants under the present rent rebate scheme. The total sum towards which they would have to make contributions should this Bill be successful and go through in its full form, is about £200,000, so three times the number of tenants are paying towards a fund which is less than half the total fund out of which they already receive benefit, and I would suggest that this is very close to equity.
Paragraph 3 of Ministry of Housing Circular 46/67 sets out and recommends very strongly the discretion which is due to a local authority in managing these matters. Having promoted a progressive Measure of this kind, surely Birmingham Corporation should be trusted to exercise its discretion with regard to this matter. Its record has been good in the past; it has been generous; it has provided this great fund, which has benefited council tenants. Surely it can be trusted to look at these problems, many of which will loom larger in the future and will need consideration on a city basis, and to show general consideration for people in poor circumstances—that is, to exercise its discretion in a proper way.
The hon. Member for Aston has made his point. I understand the difficulties to which he referred, especially with regard to the future, but it is unnecessary to put a Committee which later will deal with the Bill into a straitjacket by introducing an Instruction of this kind. Let it hear the evidence. We are trying to deal in rather a quick form with complicated evidence about what is precise equity in this matter. It is generally accepted that we are making a move towards equity. We are balanced on a fine argument.
In these circumstances, I suggest that it would be wrong for us to impose on the Committee an Instruction limiting it in the exercise of the very functions for which it is appointed. Who will want to serve on a Committee which will be limited in its discretion when dealing with a matter of this kind? I suggest that the members of the Committee should be able to hear the evidence, which may be of


a technical kind, raise issues with the Corporation's officers, and then decide the matter.
I remind the House that there is this payment of £400,000 into the rent rebate scheme which is available to municipal tenants. It is interesting to note that an extra £105,000 is provided out of the fund by way of subsidies from the Exchequer. This makes a total of £505,000 which is used to help municipal house tenants in Birmingham if they are in poor circumstances.

Mr. Julius Silverman: It will be £650,000 next year, and the amount is increasing with the number of houses built, and with the number of applications for rent rebates.

Mr. Eyre: That is so, but the burden is also increasing because of the interest rates to which I referred. This is a looming problem which the Corporation will have to solve from year to year.
Surely it is right to trust Birmingham Corporation to exercise its discretion properly. In the past, of the £400,000 used for the payment of subsidies from the General Rate Fund, only £105,000 has been taken out of the housing subsidies allocated by the Government. That is as good and responsible a decision as anyone could ask for. In fact, the £105,000 diverted to this purpose was only 3 per cent. of the total sum of £3,275,000 received from the Government by way of housing subsidies.
The hon. Member for Aston is right in saying that the total of housing subsidies has to meet a considerable number of growing burdens. My argument is that the record of the past entitles us to say, "Do not put a mandatory Instrument on the Committee which is to consider the Bill. Do not hamper the discretion of the local authority". If one views the facts fairly, one sees that the Corporation has a good record, and is therefore entitled to be trusted. The principle which I hope the Minister will support is set out in the Ministry's circular asking that the discretion of local authorities should be encouraged.
In those circumstances, I suggest that there is a finely balanced argument on equity. There are many factors, of which we have not taken full cognisance

tonight, which need to be examined in detail. I suggest that this is a matter for reference to the Committee. I hope, therefore, that the hon. Member for Aston will favourably consider the idea of withdrawing the Instruction and allowing the Bill to go to the Committee for full and detailed consideration.

8.14 p.m.

Mr. Christopher Price: I hope that hon. Members will support this Instruction. I agree very much with what has been said about it being an awkward device to have to use, but, as I understand it, in a Private Bill of this kind it is the only means by which we can insist on a principle which we regard as important.
The principle can be briefly stated to be that if relief from high rents is to be given, the job of paying the money for that relief should be supported by everybody in the community. This principle is accepted in the option mortgage scheme under which taxpayers support the scheme over the country as a whole. It has been almost entirely accepted by the ratepayers in Birmingham that there is a need to support the rent rebate scheme when rents are high. We feel that the introduction of this Bill is a new factor which makes it even more important that the principle that the relief from paying high rents should be supported by the community as a whole should be insisted upon.
I do not like any of these rent rebate schemes, or differential rent schemes, or option mortgage schemes. I think that housing should bear a cost, and that it should be the Government's job to make sure, through minimum wage regulations, and so on, that everybody can pay his rent or buy his house with his head held high, and full dignity. But if we are to have a scheme of this kind, and clearly the country has accepted that principle because the cost of housing has reached the point at which certain lower paid workers and those on pensions cannot afford to pay the market rate, we should make sure that the subsidy comes from the community as a whole.

Mr. Eyre: As I see it, the crunch of the matter is that the £105,000 which is at present paid out of the housing revenue account is used for the rent rebate scheme. Is the hon. Gentleman


suggesting that it should not be transferred and, therefore, that the whole burden of the rent rebate scheme for council tenants should be borne by the general rate fund? In view of the alarming liabilities, is the hon. Gentleman wise in forcing this issue now? Would not it be wiser not to push this but to rely on the general good will of the council in respect of the future much larger sums?

Mr. Price: I take the point that there could be an argument that the £105,000 technically comes out of the housing revenue account. One could argue about the source of that money before it got into the housing revenue account. I do not know how the Birmingham City Treasurer approaches this, but I have met many city treasurers who are able to hide £105,000, or slide it from one account into another with the greatest of ease. In terms of technical accounting, I do not think that it would be very difficult to accept the principle which we are trying to put forward, that the rebate should be paid wholly out of the rates. I support some of the points of my hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman), first about the fact that all housing is subsidised in one way or another. Municipal housing receives a considerable subsidy from the national Exchequer for building on expensive sites or perhaps building high blocks. This depends on many factors, but in spite of these subsidies I agree that the council tenants still bear a wide range of costs which other tenants do not.
As housing schemes cease to be based on normal road grids, there can be nice arguments about lighting, paths, and grass verges and about whether they should be paid for by the housing account or some other account. But all too often it is the municipal tenant who is landed with the costs, which, for the private tenant or house owner, would be borne by the general ratepayer. If, in addition, the municipal tenant has to contribute to subsidising not only the poorer municipal tenants but also those private tenants as well, this introduces an inequity. Our Instruction would achieve the equity which I am sure everyone wants, and would improve the Bill considerably.
It is easy to say that council houses are subsidised and others are not, but all

housing is subsidised—whether by rent control of private housing, which is a subsidy, although not in money terms, or by improvement grants to bring private housing up to standard. Another example is relief on interest on mortgage payments. There are many such examples. As my hon. Friend said, the owner-occupier benefits considerably from tax relief according to how he is buying his house, and this is analogous to the subsidy to the council house tenant, who not only does not get this relief but must bear many burdens which people in other kinds of housing do not. Although my remarks on Second Reading still apply, and this is a rough and ready expedient, the Instruction would improve matters, and I hope that hon. Members will support it.

8.23 p.m.

Mrs. Knight: I could not follow the argument of the hon. Member for Birmingham, Perry Barr (Mr. Christopher Price), particularly in his reference—he was not specific—to the many things for which council tenants have to pay and which private tenants get from the rates. He made a tentative suggestion about grass plots, but this argument does not stand up, because there is a great deal of such greensward in the part of Birmingham which I represent and the tenants of the block concerned pay for it. These things do not come out of the General Rate Fund. Green areas which are part of a plan do not come out of rates but from the pockets of those who are often paying high rents for their property.
The hon. Gentleman advanced no other arguments and I can think of none, though I should be delighted if he could suggest any now—

Mr. Christopher Price: I did not give a list for fear of wearying the House, but one more example is that, in the many high flats in the hon. Lady's constituency, the lift shafts are totally analogous to ordinary roads outside houses and would otherwise be paid for out of the general rate fund. That is an additional cost burden to the municipal tenants. I was objecting to other burdens being imposed after this is being put on by the Bill.

Mrs. Knight: But tenants of privately-owned high blocks similarly pay rents which include the cost of the lifts. It is


not valid to suggest that the private tenant gets off better in this particular. I am sure that the Birmingham Corporation does not wish, by being fair to the private tenant, to be unfair to council tenants. I would not support it if it were. This is not in the Corporation's mind and I am sure that it has gone into the matter carefully—

Mr. Macdonald: I do not want to impute motives, but when the hon. Lady says that the Corporation is not being unfair, would she consider the fact that, while that £105,000 exists, the prosperous municipal tenant is contributing twice to the subsidy of the less prosperous, once as a ratepayer and once as a council tenant, whereas, under the Bill, there will be only one subsidy by the ratepayer to the private tenant? That £105,000 appears to us to introduce an element of unfairness.

Mrs. Knight: The private tenant is similarly paying into the rate fund. On certain occasions figures have been given, but I would like to round them up to provide the background to this discussion. For 1967–68 the rent rebate scheme for municipal tenants will cost £505,000, of which, I understand, £400,000 will come out of the General Rate Fund. It has been suggested that very little comes out of this fund for this purpose, but we see that the lions' share comes from it and that only the residue comes from the housing revenue account, which is, after all credited annually with the housing subsidies which the Corporation receives from the Exchequer.
As costs go up—as they have done and as they are bound to continue to do—there is no doubt that the Exchequer subsidy is also bound to rise. In the current year the Exchequer subsidy is well over £3 million; and while I am sure that the hon. Member for Birmingham, Aston (Mr. Julius Silverman) did not intend to mislead the House, he suggested that a profit was being made on council house rents when, in fact, that is not the case. I am sure that he was not accurately informed about the latest figures. Far from making a profit, there will be a loss of probably £1 million.

Mr. Julius Silverman: My figures were based on forecasted and projected figures. In the past, any anticipated deficit was

put on the tenants and the deficit was made good. Apart from that, the deficit did not take into account the fact that the Council was accumulating between £1 and £2 million by debt redemption.

Mrs. Knight: That does not alter the fact that the hon. Gentleman said earlier that a profit was being made out of council house rents by Birmingham Corporation.

Mr. Silverman: That is so.

Mrs. Knight: We have been told authoritatively that, far from there being a profit, there is a loss of about £1 million. That is being accumulated now. Either there is a profit or a loss. My information is that there is a loss. If the hon. Gentleman has other information which suggests that there is a profit, I am ready to hear it.

Mr. Silverman: It depends on how the accounts are kept.

Mrs. Knight: If, by brilliant accounting, the hon. Gentleman can change a deficit into a profit, many people will be delighted to gain from his advice.
The crux of this matter is the Exchequer subsidy and this must be borne in mind because it stands to the benefit of the council house tenants as a whole. I am told that the Corporation has tried to maintain a fair balance between ratepayers and municipal tenants and that, from the point of view of the rate rebate scheme, the Corporation feels, I suggest with some justification, that the £400,000 met out of the General Rate Fund is a fair proportion of the general cost to place on ratepayers, particularly having regard to the amount of subsidy enjoyed by municipal tenants as a whole.
I understand that the Corporation has made careful inquiries into this matter and has looked closely at Circular 46/47 issued on 29th June, 1967, by the Ministry of Housing and Local Government. That circular referred to the general subject of rent rebate schemes, reiterated the Government's view, as expressed in the White Paper on the Housing Programme for 1965–70, and added:
…subsidies should not be used wholly or even mainly to keep general rent levels low. Help for those who most need it can be given only if the subsidies are in large part used to provide rebates for tenants whose means are small".


In appropriating merely 3 per cent. of the housing subsidies in 1967–68 towards the cost of its rent rebate scheme, and meeting the rest of the cost out of the general rate fund, the Corporation feels that it is being fair to the municipal tenant.
The more one looks at the Birmingham Corporation's case for the Bill and the way in which the Corporation has investigated the matter, the more one must concede that it has been extremely careful in being fair to this new section and that it is not in any way being unfair to the old section. I gather that the Corporation feels rather strongly that helping a needy section of the community which at the moment in respect of rent liability receives no assistance, is quite another matter from accepting a fetter on the discretion which Parliament provided in the 1967 Act.
What Birmingham Corporation says and what this Instruction seeks to deny is that the Corporation tenant is already receiving a fair amount from the general rate fund as well as through housing subsidy. The private tenant is receiving nothing at all. This should be at least balanced fairly. In order to allow what we decided earlier to allow, the Instruction would be a quite unnecessary fetter and would not produce the result which hon. Members supporting the Instruction have sought to bring about. One is bound to say that the argument for the Instruction falls to the ground when we consider the weight of the subsidy and the importance of it to council house tenants.

8.36 p.m.

Mr. MacColl: There are one or two points on which I should like to try to help the House. Most of the debate has been on two matters which I would not regard as being within my competence in an argument about the housing finances of the city of Birmingham. Having said on Second Reading that these are very much matters for local authorities to settle for themselves, I would not want to comment on them. We have never said that it was wrong for a local authority to make a rate contribution towards the housing revenue account. It depends on the level of rents and conditions in the area. All we have said is that there should be a reasonable

balance between the interest of the ratepayer and the tenant.
It is a matter for debate, and my hon. Friends and hon. Members opposite from Birmingham constituencies are entitled to deploy their argument without my joining in the discussion. But what has been said has some implications for the Government's general housing policy with regard to subsidies and rent. On that there are one or two things I wish to say. My hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman) thought that the time had come when the Government should take a thorough look at the whole field of rent policy. That is what we have begun to do with the submission to the Prices and Incomes Board of a number of council rents illustrating certain problems thrown up by the present situation. For some the solutions are difficult and some are probably more easy to justify than others. We have put them to the Board as a dispassionate body and asked for its opinion.

Mr. Julius Silverman: I was not dealing with the reference to the Prices and Incomes Board but with the whole structure of book-keeping on housing revenue accounts.

Mr. MacColl: On the structure of housing revenue accounts, a working party is nearing the end of its discussions. The present Minister of Public Building and Works mentioned this when the Housing Subsidies Bill was going through the House. How successful the working party will be in finding a solution to all these problems I do not know, but it is fair to say that we are trying to see how far we can go in improving the position. It may be that it will be difficult to do more than to leave it to particular housing authorities to adjust the housing revenue account and anomalies in it by rate contributions. They have that power and that may appear to be the best solution. I do not know and cannot say until we get the report.
I do not think there is any confusion about what our policy has been on the relation of rent and subsidies. This was laid down in the 1965 White Paper laid before the House by my right hon. Friend now the Lord President of the Council. Subsequently, it became the basis of the Housing Subsidies Bill. It was very much


in the discussions in Committee on that Bill and provided the major feature of our policy.
My hon. Friend the Member for Aston said—and this is a view he can take although I do not altogether agree with him—that all we were providing in our present subsidies was a subsidy to meet increases in interest. That is the general subsidy, but we are also making special subsidies for expensive sites and for multi-storey flats. The general subsidy also reflects the increase in the value of land. As the value of land goes up the subsidy goes up, too. I feel that our subsidies are large and flexible. Our general policy is that local authorities ought to fix, not an extortionate or profiteering rent, but a fair standard rent on what they consider to be the value of the houses. Then, in particular cases where those rents are above the means people can afford, the subsidy should be used, by rebates, to help people unable to meet the rents. That is the policy we have generally adopted and it remains our policy.

Mr. Julius Silverman: Would my hon. Friend propose to deal similarly with owner-occupiers, suggesting that where they get tax relief or mortgage option a portion of that should be used only for the neediest of owner-occupiers?

Mr. MacColl: Insofar as an owner-occupier receives tax relief there are criticisms of it as a means test in reverse in that the richer a man is the more subsidy he gets. It is because of our recognition of that principle that we introduced the option mortgage scheme in order to provide the same kind of benefit for people of modest means. It is true that my hon. Friend, in his astuteness, can say that there is no kind of means test on that, but in effect there is, because it is only where a person comes below the standard rate of Income Tax that it will be worth while to opt into the scheme. Thus, there is not the wide difference that my hon. Friend might have thought.
That remains our general attitude on rent and subsidies. I merely wished to put that to the House when it is considering the particular case of Birmingham. I would tell my hon. Friends that it seems to me that this Instruction is an extremely rigid one. My hon. Friend

the Member for Birmingham, Perry Bar (Mr. Christopher Price) said it is very difficult to draft something that is not rigid. I quite accept that, and if my hon. Friend should do as he often does, and move in Standing Committee an amendment to a Bill saying, "I know this is not perfect but it is up to you to make it perfect," that is a perfectly reasonable argument for a private Member to adopt. I hope I may not be caught seeking to pick holes in drafting in order to escape the substance; but I understand this is a decision to be taken by the House which in its very form will be absolutely mandatory on the Committee and will shut out from the Committee all consideration within this Instruction.

Mr. Julius Silverman: I can assure my hon. Friend that we had a long consultation with the Private Bill Office on this, and this is the only way in which it is possible to deal with an Amendment on a Private Bill. I do not like it but unfortunately it was the only way open to us.

Mr. MacColl: I am in no way questioning that. I am merely putting to the House the implications. The Instruction seems a very strict mandate to the Committee, in very absolute terms, because the phrase used is "wholly out of the General Rate Fund". Therefore it is not a question of the pros and cons of a rate contribution of so much, which we discussed in our very interesting debate just now. One of my hon. Friends mentioned rate rebates, where 75 per cent. comes from the Exchequer and 25 per cent. from the rates. I understand that the Instruction says that the whole of rent rebates must come from the rates. That seems a very great interference with a local authority's discretion.
I am sure my hon. Friends will not be offended if I tell them that they should consider whether they run the danger of the Motion's being misinterpreted. It would be a bad thing if the House gave the impression that it warmly welcomed the Second Reading of a Bill, with no disagreement about it, and then immediately issued an Instruction to the Committee which in effect said, "We shall so tie the hands of the City Council that it is almost certain that it will not be able to work the Bill." I know my hon. Friends far too well to think that this


would be intentional. It is for the House to decide, but I wonder if that would be a very wise procedure.

8.47 p.m.

Mr. Graham Page: The House is very grateful to the Joint Parliamentary Secretary to the Ministry of Housing and Local Government for his assistance on the general points arising from this local Bill. I wish only to remind the House again that the Bill is a local matter which has been fully accepted by the City Council and by the town meeting, without their choosing to insert anything in the nature of the Instruction. This is a matter of the housing finance of the Corporation, and if the House accepted the Instruction we should be saying that we do not trust the city of Birmingham to run its own housing finance, to run its own housing revenue account.
As I understand it, the hon. Member for Birmingham, Aston (Mr. Julius Silverman) does not object to rent rebates by local authorities to private tenants. He does not object to rebates being paid from the general rates, but he wishes to use the Bill to reform the law relating to financing of rebates to council tenants, when what we are dealing with is the question of rebates to private tenants. He wishes to use it to the extent of saying that unless the law he reformed in the way suggested in the Instruction the admirable reform for private tenants in need will be denied.
That is a rather dog-in-the-manger attitude. If the Instruction were accepted, the result would be, as the Joint Parliamentary Secretary said, that the Bill would be unworkable. I cannot see how the Birmingham Corporation could work it if its hands were tied in that way. I do not think that the hon. Gentleman and his supporters have a strong case.
The fund from which council tenant rebates come is supported by subsidy; if

it goes into deficit, it is supported by the general rates. Like my hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) I could not understand the argument that council tenants always have to pay something more. The complications of that argument, and the further discussions about the figures involved here, seemed to prove that we ought to leave this to the management of the City Corporation. As my hon. Friend the Member for Birmingham, Hall Green (Mr. Eyre) said, leave it to the Committee which will consider the Bill. The hon. Member for Birmingham, Aston said that this was the only way in which this could be done. It is true that it is the only way in which he can bring this to the Floor of the House, but it is not the only way in which an Amendment can be made to the Bill.
If a case is proved for the Amendment as set out in the Instruction, then the Committee can make the Amendment in the proper place, considering the whole matter in detail. If it feels that the Birmingham City Corporation ought to have its hands tied in this way, because of the figures relating to its housing finance, because of the figures relating to the housing revenue account, then the Committee must make the Amendment and we will consider it when it comes back to the House. It is surely right for us on Second Reading not to bind the hands of the Committee, or eventually the Birmingham City Corporation.

Mr. Julius Silverman: I am anxious not to disturb the happy consensus between the two Front Benches. We who have spoken in favour of this Instruction have made our point and do not intend to press this to a Division. We hope that the people of Birmingham will take note of the point, and I therefore beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.

WAYS AND MEANS

BUDGET STATEMENT

AMENDMENT OF THE LAW

Postponed Proceeding on Question:
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that, without prejudice to any authorisation by virtue of any Resolution relating to purchase tax or selective employment tax, this Resolution does not extend to the making of amendments of the enactments relating to either of those taxes so as to give relief from tax.—[Mr. Roy Jenkins.]

—resumed.

Question again proposed.

8.51 p.m.

Mr. John Lee: When the debate on the Budget was interrupted, I was giving qualified support for the Budget proposals. I am bound to say that after the weeks of morbid prognostication in the Press, culminating in the near hysteria of the last few days, I suppose that it will be an agreeable surprise for the Chancellor to gain any support at all.
There are a number of proposals in the Budget which command support because they are meritorious. I have mentioned that most of us would welcome the family allowance changes. Most of us would regard the raising of the limit for personal savings in National Savings Certificates as a wholly admirable proposal. We can bear with fortitude the increased betting duties, and most of the Purchase Tax proposals do not really deserve much opposition. Some of them are quite obviously justified not only in terms of their being on luxury goods but also because marginally, at the increase in the tax levied might help to canalise them on to the export market.
From this side of the House the most desirable and welcome measure is the special levy on investment incomes. If it had not been included I would have been extremely disappointed. One knew that there were bound to be proposals bearing hardly on people of small incomes. One feared, and to some extent those fears were fulfilled, that the Government, obsessed as they are with operating a mixed economy, would bring in a disproportionate number of measures of that kind.
Even though it may be regarded quite unmistakenly and unashamedly as a political sop, it is a very welcome sop for many of us. It is not a substitute for a wealth tax. It is, after all, a tax on income and not on accretions of private wealth. It is welcome none the less. I hope that by next year the Chancellor will have got round to a genuine wealth tax. In spite of the high rates of taxation that have prevailed for so many years, and in spite of two world wars and enormous Government expenditure, whether desirable or not, there still remain enormous private fortunes. The distribution of private wealth is less equitable than in the United States. When one bears these things in mind, one realises that we are a long way from being an equal society.
I read not long ago that even now the Duke of Norfolk is worth more than Charles Clore or Sir Isaac Wolfson. In other words, the old feudal wealth which has accumulated over the centuries is bigger even than the enormous fortunes which entrepeneurs have built up in the post-war years or even in the inter-war years. That is the measure of the task which the Chancellor had to undertake.
Let us examine the objectives that the Budget was supposed to accomplish. There were three that my right hon. Friend should have had in mind. The first was to accomplish a shift in resources to exports without causing intolerable internal inflation; the second was to emancipate our economy from foreign financial control; the third was to accomplish some measure of shift towards equality. My right hon. Friend has made a skilful though by no means wholly adequate attempt to deal with the first, has largely ignored the second and has tentatively touched on the third.
In dealing with the first objective, the Government rely too much on repressing demand, both by statutory control of wages and by other restrictive measures in the Budget, to ward off inflation. It should be said—and I do not know how far this is the view of those of my hon. Friends who think as I do on the left of the party—that I do not regard the special levy, welcome as it is, as a sufficient sop to ward off the objections we have to statutory control of wages. Even the fact that dividends are to be brought within the ambit of the new prices and


incomes Legislation—and why were they not there before?—still does not really justify such measures. I am sure that this control of wages will create a great deal of resentment.
The one valid point which the Leader of the Opposition seemed able to make in his rather frantic firework display was the fact that every time the Government introduce prices and incomes legislation they say it is for the last time—rather like the old lag whose safe-blowing job is always the last one he will do. This has the effect of causing a cynicism and it will undoubtedly evoke a great deal of resentment.
One of the major aspects of my right hon. Friend's speech was the all too little reference to the international exchange crisis. This has happened probably for two reasons: first, that the Budget was probably prepared some days ago, before this became as acute as it is; secondly, there was very little in the fiscal measures the Chancellor brought in today that would have a direct bearing on the problem. Nevertheless, it is clear that the effect of this international exchange crisis is very likely to stultify the efforts that the Government have in mind. No amount of energetic effort in the export market, even if accompanied by successful measures to hold down prices so that we are not priced out of our market, is going to be successful if the entire system of foreign exchange is going to collapse.
I have some admiration for General de Gaulle in many matters, but I am bound to say that What he has been doing over the last two or three months in respect of the "gold rush" is utterly mischievous; he has done a considerable disservice to the whole world. What the Government now have to face is the fact that there may not be a boom in 1970–71, because experts could be strangulated by lack of liquidity. The measures taken over this weekend are by no means a complete answer. The two-price system may very well break down and the central bankers will be tempted to operate in the black market of the second price. It is not a solution to the fact that the dollar will continue to be weak and the Americans may be obliged to devalue the dollar. If they do, then we are faced with a situation in which many of the benefits which would have been derived

from devaluation will be rendered nugatory. The Government made a profound mistake in not devaluing three years ago. Having failed to do that, it was a mistake not to devalue in July, 1966. To that extent, they have wasted three years and are very much to be blamed for the situation which now exists.
I have no enthusiasm for the increased standby arrangements. I voted, with 16 of my colleagues, against the standby arrangements last November. This is not going to do anything to ward off the day when this country is emancipated from overseas' control.
The most critical, and certainly the least justifiable omission in the Chancellor's references—few though they were—to the international aspect of the matter, was the way in which he referred to overseas portfolio investments and referred to the fact that the Government takes 25 per cent. of the realisation of sales and credits to the reserves. He then smartly put it on one side and said nothing more about it. My hon. Friend the Member for Lewisham, West (Mr. Dickens) and other hon. Members have done a great deal of work on this, and it seems strange that this matter has been left on one side.
Although we are a poor nation in many ways, we still have a great many assets overseas. The time has come when we should be realising them much more rapidly than we are. One argument that might even appeal to some hon. Members opposite, who obviously do not find this sort of proposal to their taste, is that, in so far as we might undertake the realisation of overseas fixed assets, we might very well be cutting our losses. It has been known to happen more than once that British assets were confiscated by an overseas government. It happened in Argentina and in Mexico before the war. It might be a good idea, from the purely selfish point of view, to realise these assets and to put the proceeds into the reserves.
My hon. Friend the Member for Lewisham, West is mainly concerned with portfolio investments. Certainly those are the ones which should be realised first in the measures which must surely be taken sooner or later to lessen the burden which we bear as a banker for the sterling area.
I cannot understand why the Chancellor should be so coy about this. He wrote about it in pamphlets frequently when the


Labour Party was in opposition. He said that what was most likely to stultify our progress was the fact that we would undertake social measures which were not to the liking of our creditors and that they would withdraw their funds at awkward moments, so bringing matters to a standstill. That is precisely what has happened several times in the last three years. Therefore, I find it all the more surprising that the Government have not yet decided to grasp that nettle.
I said that we might find that the effect of the international exchange crisis would stultify our attempts to get an export boom moving and to sustain it in the period 1970–71. I said that what might cause it, besides the problems that we are having with exchange control, is internal inflation. I cannot understand why the Government are so reluctant to resort to the comprehensive kinds of control over internal prices that we had in the war and post-war years. The fact remains that they were remarkably successful.
It may be that the Prime Minister has a bad conscience about this, because there is a bit of the Prime Minister's history about which the House should be reminded. When he was President of the Board of Trade just after the 1950 Election, he had a bonfire of controls. He got rid of a great deal of price controls and he reopened some of the commodity markets.

Mr. Arthur Lewis: And prices went up.

Mr. Lee: Then we had the Korean war, and we paid for it. The country paid for it economically, and this party paid for it politically. It was one of the reasons why we disappeared into limbo for 13 years.
It is high time that the Government realised that, if they are to leave a large part of the British economy in private hands, the only way in which they can hope to run it properly is to do so with the kinds of controls that we operated in that period. What we do not want is the increasing subsidy to private enterprise that we see today. Hon. Members opposite frequently complain about the amount of Government expenditure, and control of Government expenditure is one of the most important constitutional functions of Parliament. However, when

one considers some of the ways in which Government contracts have gone astray, particularly in the aircraft construction industry, hon. Members on both sides have every right to be vigilant. But I wonder how many complain about the amount of financial assistance which is given to private enterprise without very much control.
I notice that the figure for direct financial assistance in the last year of Conservative Government, before there was any S.E.T., before the S.E.T. refunds and premiums and before the Industrial Reorganisation Corporation, was some £347 million. The corresponding figure for 1966–67 is £447 million. We do not have a private enterprise economy or a fully nationalised one. What we really have is a private system subsidised by the taxpayer.
When this party was in opposition, my right hon. Friend the Member for Battersea, North (Mr. Jay) wrote about money being invested in the form of equity. He pointed out that, when an insurance company invests in firms, it demands equities which are relative to its holding. Surely this should be the same in the case of the Government. If the Government are to provide financial assistance—and I view with a great deal of suspicion and distrust that this should be so—the least we can demand is that they should take an equity in whatever is being invested in. This is supposed to be the objective behind the Industrial Expansion Bill, but the whole effect was spoilt when Ministers fell over each other to deny that there was any attempt thereby to gain control of the firms or organisations in which the money was to be invested.
The other day I put down a Question to the President of the Board of Trade asking about those cases where financial assistance had been given to firms whose reserves were perfectly adequate to carry out the development for which the money was provided. I received the reply—this related to finance under The Local Employment Act—that there was no record at the Board of Trade to say what firms were in a position to finance development from their own reserves, but they were being financed out of grants. Not only that, but that, in the opinion of the President of the Board of Trade, it would mean a disproportionate amount of time


would be wasted in finding this out. This is a most extraordinary situation. If Government money is being provided we should have the strictest possible control over it, and, wherever possible, the moment that a Government Department or the Government generally provide finance for private enterprise, that is the time the Government should seriously seek to nationalise it.
A number of hon. Members have sat through the debate on the affairs of the Birmingham Corporation to take part in this debate and I would not wish to delay their entry. Having found myself in the peculiar position of my speech being bisected, I do not wish to take advantage of the situation.
In conclusion, I must say that the Government have reached the stage when they have very little time left in which to recover their political position. If they really wanted to inspire their demoralised supporters, the best thing would have been a really good thumping soak-the rich capital levy. They have not done so. The special contribution, welcome though it is, may well not be sufficient. If by this time next year we are still in the position politically that we are today, I doubt very much whether anything the Chancellor can do, skilful though he is, as he has demonstrated this afternoon, will be able to pull the chestnuts out of the fire.

9.1,1 p.m.

Sir Robert Cary: I hope that the hon. Gentleman the Member for Reading (Mr. John Lee) will not expect me to follow his theme about wealth and the creation of wealth. This is a free society, and if wealth is created privately and honourably earned it is an immense asset in a free society. I deplore that it should become the subject of spiteful and envious attack, motivated sometimes politically. In response to one sentence uttered by the Chancellor of the Exchequer today, I could not help but raise the cry, "The politics of envy."
I should like to begin on a personal note. It was my privilege to first enter the House of Commons in 1935 with the late father of the Chancellor of the Exchequer who, as Vice-President of the Miners' Federation, had been elected the Member for Pontypool. We talked early in that Parliament because my own industrial constituency along the Lan

cashire-Cheshire border contained the Manchester collieries at Swinton and Pendlebury. The Chief Secretary knows the area well. My only wish today was that the Chancellor's gracious father had been present to witness his son discharging with great responsibility and courage that task at the Treasury Box. When I think of the intervening 35 years, perhaps the House will not misunderstand me when I say, all honour to the son of a former Member of this House who discharged his task with such competence at that Box today.
There are some other sides to this matter which perhaps the House will allow me to touch upon. The Chancellor of the Exchequer said nothing today about the curtain raiser yesterday, and in my constituency I have found the deepest anger at the announcements—the almost shock announcements—made by the Gas Board and the Post Office. The charges for gas are to be higher by something in the neighbourhood of 2s. 2½d. in the £. When I think of the effect of that in the small side streets of Manchester or Salford, I consider it an immense imposition.
Mr. Ralph Turvey, who is a full-time member of the Prices and Incomes Board, said, in making this announcement, that the new gas prices ought to come into operation as soon as possible. In addition to that, there was the ancillary information that the charge for rental of the telephone at home will be increased by £2, the cost of a first-class delivery letter will now be increased to 5d. and there will be other charges on telephone calls, parcels and postal orders, the two latter—parcel and postal orders—striking directly at the working people.
All these charges will come to £70 million, and I believe that the Gas Board charges will amount to something in the neighbourhood of £25 million to £30 million. These are further impositions which are to fall upon the country, and there are to be some electricity adjustments which will fall on industry, I think. So beyond the figure given to us today by the Chancellor of the Exchequer of something in the neighbourhood of £1,000 million there are these additions which came in what might be called the local Budget the day before. I wonder whether my constituents, when they read the late papers tonight and the news tomorrow


morning, will have any anger left for the right hon. Gentleman the Chancellor of the Exchequer.
I found one confusing matter, and perhaps other Members have run into this same problem. I said literally to my own supporters that this came as complete news to me, that I had absolutely no knowledge of these charges which are to be made. They knew I would be on my way here to listen to the additions today and half of them rather suspected that. Yet in some ways Members of Parliament ought to deal more directly with some of these matters. We ought to know, we ought to have some information, and we ought even to have the power to comment before these things actually happen. I had none, and I object to all outside bodies which act outside the range of Parliament. I also object to Parliamentary problems being put into the hands of judges, Royal Commissions and other neutral bodies or individuals. Many hon. Members of this House have read the words of Professor Bernard Crick, who puts it very well in saying:
This is really the root of the malaise in contemporary British Government—the belief that is growing up in Downing Street and Whitehall that if anything useful is to be done, it must be taken out of politics.
My life is smothered in politics.
There has grown up a cult of 'Wise Men' who are to be consulted if anything 'goes wrong', distinguished public figures, but never politicians, all with an aura of 'very responsible fellows indeed' about them, to hide how politically irresponsible they are, For political decisions should be made by politicians, who can be held responsible by the electorate, not by distinguished figures who cannot be.
I would much rather be indicted by my supporters in Manchester for knowing something about it, than having to say rather weakly, "I did not know anything about this, and nobody has ever bothered to tell me". I am the only target for them for any sort of representations that I can make to the Government of the day through you, Mr. Speaker.
There are many other matters in the Budget on which I could touch, but with competence and skill my right hon. Friend the shadow Chancellor in opening the debate tomorrow will deal with these matters. I would just like to put to the Chancellor three matters on which there

is agreement. I thank him and congratulate him for leaving the public service vehicle out of fuel taxation. The House knows of my deep interest in transport, and, like his predecessor, the Chancellor knew that, combined with the information which has come to us about increases in gas, electricity, and telephone charges, to leave the public service vehicle in for that further taxation would have meant an outbreak of mass fares applications through the traffic commissioners.
I also congratulate the Chancellor on at least giving official recognition—even though it is to be on a free vote of the House I do not doubt its outcome—to a national lottery.

Mr. Ron Lewis: Shame.

Sir R. Cary: The hon. Gentleman may say "Shame", but that was cried by some Members on both sides of the House when Mr. Harold Macmillan produced the Premium Bond scheme, but it has been a thumping good success. The Chancellor now intends to capitalise on the work done by a former distinguished Prime Minister by having a weekly jackpot. Let us say that that was halfway, and official recognition of a national lottery by a free vote is to put on the seven league boots and go the full distance.
Above all, and this touches everybody's pocket, I congratulate the Chancellor on leaving out the standard rate of Income Tax. I had a former distinguished occupant of No. 11, Downing Street not far from me today. During the run in and the tactical dispositions made by the Chancellor we thought that we were coming to that. Within my small compass I had taken a small bet on whether it would be 1s. or 9d. on the standard rate. I felt rather flummoxed, rather like last year's National at the twenty-second fence, there was no race.
Finally, and I do not mean this offensively, it is the Government who are in the box, not the Opposition. I notice that frequently hon. Gentlemen opposite try to steer what is after all a shadow Government into the box, as though they were under scrutiny by the nation. The scrutiny has to go to the Treasury Bench, and I say to the right hon. Gentleman that today's panic stems from our own frantic devaluation in November and the


world's loss of faith in sterling which was allowed to go unchecked for months. We remember the bitter complaints in December that we had to wait until this predictable date today. Today's savage economies will not stop the Government spending an extra £1,000 million next year. Today the Government demand a curb on spending, yet they put up their spending ten times faster than private spending Today, of every extra £ which the nation earns, the Government snatch and spend 15s. Today, there is mountting anger in the hearts of our people and the Government will ignore it at their peril.

9.25 p.m.

Mr. R. B. Cant: I welcome the Budget, partly because elsewhere some time ago, the Chancellor invited some of his hon. Friends to offer him suggestions in a democratic exercise. In opening the discussions, I made certain suggestions, many of which are in the Budget, which I, as a new Member, find very gratifying. The only difference which we appear to have had is that I suggested the very unpopular course of raising the standard rate of Income Tax on earned income by 3d. and on unearned income by 4d. He has preferred other routes, including an increase in S.E.T. In this course, I believe—I. hope that I do not provoke hon. Members too much—that he was right and I was wrong.
In assessing the present Government's record, any reasonable politician on the other side would concede, I think, that this. Government have had more bad luck than any other in British history, at any rate in this century. One should remember that some people tried last week to imagine whether anything else could possibly happen and concluded that we had exhausted our misfortunes, yet this was followed by the international monetary crisis over the weekend. We have survived the weekend very well. Certain decisions were taken of which I do not wholly approve, but which suggest a modest compromise.
Senator Kennedy might have reflected on this crisis, particularly as it affected the United States, in making his bid for the Democratic nomination. I recall reading about the Democratic nomination of 1896, when an equally good-looking,

equally young aspirant to the nomination, a politician called Bryan, thought of a way to clinch it for himself. His speech then became known as the "cross of gold" speech, when he said:
You shall not press down on the brow of labour this crown of thorns. You shall not cruify mankind on a cross of gold.
Rather than entering the lists for the nomination by using Vietnam and other agonising problems for the United States Government, if Senator Kennedy had said that he would eliminate gold from the United States consideration of future international monetary reform, he might have made sure of winning the nomination easily. He might also have reflected that if he won the nomination and followed Bryan he would lose the election.
I welcome the Budget because it is realistic, although it is bound to have a political backlash. The Chancellor has taken an enormous amount in extra taxation. Whether or not the total is right and he has achieved the right balance between direct and indirect taxation I do not know and only the future will tell. It is ironical, however, that the greatest criticism is likely to come about the extra taxes imposed on the motorist. Of all the status symbols possessed by the average working man, the motor car is probably his greatest, perhaps ranking even higher than his house. Nor will I comment on the incomes policy because I still remain implacably opposed to it, for reasons I have expressed in the House previously.
While I do not wish to lecture the House, the remarks of the hon. Member for Manchester, Withington (Sir R. Cary) call to mind the fashions that have existed in economics over the years. The key to our economic salvation has had more discussion than most other subjects. We start with league tables representing the relationship between investment and gross national product. That fashion was followed by the passion of some people for economies of scale related to the Common Market. Becoming even more fashionable, one might consider the Philips curve and its relationship to unemployment and the economy, and then move on to the ultimate, Paishism, with which the Prime Minister flirted some time ago.
We were told by many people that incomes policy was the only answer to cost


inflation, but recently we have discovered that the great problem which we must overcome to become a viable economy is that of personal consumption. Our personal consumption, as a percentage of the G.N.P., exceeds that of all other industrial countries, we are told, but most students of O-level economics have known that for some time. At this stage in our economic destiny this appears to be the nigger in the woodpile.
Hon. Members have not stressed the fact—probably because this is not a vote-catcher—that if one wants to solve one's problems by suppressing consumption, it is easier to suppress public than private consumption. We have, therefore, shifted to the point made in the closing remarks of the hon. Member for Withington; his suggestion that we will not solve our problems until the Government put such a reign on public expenditure that, as a proportion of the G.N.P., it is substantially decreased. A more sophisticated version of this theory of public expenditure as the root of our misfortunes has been provided by a new architect of economic policies on the benches opposite—the right hon. Member for Streatham (Mr. Sandys), who is sometimes referred to as the shadow Leader of the Opposition. Speaking last weekend, he went a stage further. I agree that he was reflecting the doctrine of certain other more prominent right hon. Gentlemen opposite. He said that unless any Government can finance their public expenditure either through tax revenues or borrowing in the market they are on the road to disaster.
There may be something in this. It is a doctrine made fashionable by a well-known Frence politician, M. Rueff. He talked about l'impasse, about this hiatus between expenditure and revenue which led to the necessity for borrowing from the banking system. In this country financial journalists have coined a highly technical phrase for this means of finance to which Governments are occasionally driven. They call it "funny money", not real money or market borrowing, but the sort of borrowing of a last resort which comes in some mysterious way through the money-creating powers of the commercial banking system.
I would concede that a Government must keep their eye on this particular

problem because, if they do not, it is quite possible that the creation of this funny money may have serious consequences for another aspect of policy to which the Chancellor referred when he spoke of credit control. We must keep this in mind because it is the failure of the Government to evolve adequate and effective fiscal and monetary policies containing our use of resources within the supply of resources available that has led us to two defeats. One was the need to resort to incomes policy and the other the need to resort to devaluation.
I do not want at this time of night to get involved in technicalities, but I think it undoubtedly true that this Government have tended to follow the doctrine and the policy of hon. Members opposite when they were the Government because, if any part erected Keynesian deficit finance into a way of life when it was intended to be only a temporary expedient to overcome periods of acute unemployment, it was the party of hon. Members opposite. Continuously they added year after year to the National Debt in this way. Now they point an accusing finger at my right hon. Friends, but truth is truth and one must concede it.
We are getting to a stage in which if we are not very careful we shall make the operation of monetary policy difficult. In an article in the October Lloyd's Bank Review, Professor Cramp, after exhaustive investigation of this problem, came to the conclusion that if we have these very large deficits the power of the banking system over the supply of money is very limited indeed. There are other aspects of this problem which if I had time I would discuss. If hon. Members opposite had had the measure of political integrity with which I have always credited them, one of the things they would have done almost immediately through the voice of the Leader of the Opposition would have been to congratulate the Chancellor on achieving what in fact they had asked him to do.
The most important achievement of this Budget, without any doubt, is that what we used to call in the halcyon days before today "the net borrowing requirement" has been cut from well over £1,000 million to £358 million; and if it is not possible for the Chancellor of the Exchequer to find £358 million


through the issue of short- or long-term marketable securities then I shall be very surprised indeed. He will certainly do that without having to have recourse to the sterling counterpart of the funds that come from abroad by borrowing or a reduction in reserves which have been a source of so much financial support for Governments in the past. That is the main point I want to make. But the Chancellor of the Exchequer has done what I am sure hon. Gentlemen opposite felt it was quite beyond his capability to do. He has reduced this net borrowing requirement, not only through reducing expenditure, as I would concede, but through raising taxes to such a degree that the finances of this country will be under much greater control in the future than they have been in the past.
In my final point I come back to the general situation. This has been a hard Budget. Without any doubt there will be criticism. Our great problem is whether or not we have the time to show the British people that this policy is going to pay off. If the Chancellor of the Exchequer has to say as General de Gaulle said of the devaluation of 1958 and 1959: "La verite c'est la séverité", let us hope that our devaluation and our fiscal and monetary policies will prove to be as successful for this country as they were for France.

9.42 p.m.

Mr. Patrick Wolrige-Gordon: I listened with very great interest to the hon. Gentleman the Member for Stoke-on-Trent, Central (Mr. Cant) and, in a sense, I agree with much of what he had to say. My only real concern is that a Budget is much more than the compilation of sums and of various figures of one sort or another. What matters is what the people of this country think of it and how they react to it, if we are really going to get out of our difficulties. I want to say straight away that I feel that the effects of this Budget, particularly on Scotland, will be extremely severe.
First and perhaps most obvious, is the increase of 50 per cent. in the Selective Employment Tax. We all heard the Chancellor of the Exchequer speak this afternoon about provision for certain hotels in rural areas—a vague definition if ever there was one. We shall certainly

be very anxious to find out from the Government as quickly as possible where those hotels are, which ones they are and why this should affect hotels in one area and not in another. I can see great difficulties of definition in this particular respect. I certainly hope that the Aberdeen area will be included. The question of the tourist trade, in particular, is one that my right hon. and hon. Friends and I have pursued in the interests of Scotland, and we are glad to have even this small recompense for a sorely tried and potentially very valuable industry.
Scotland does not consist only of hotels. There is a great deal of service industry, particularly in the development area—the whole country, as it now is—which is sorely affected by the Selective Employment Tax. It has had a serious impact on the employment of our people, which will inevitably be aggravated by the increase in the tax. The philosophy behind the tax that one simply uses it to switch men from service to manufacturing industries does not apply when there is no alternative manufacturing industry and spare capacity in the country.
Another point concerns the increase in transport charges. I rejoice, as we all do, that certain of the more iniquitous parts of the Transport Bill have at last been dropped, thanks to the pressure from this side of the House. But the incidence of taxation on the transport industry will still be very severe, and again most seriously affects Scotland, which has such long lines of communication with the other parts of Britain. No Government and no reorganisation can deal with that.
The only chance for Scotland is to have efficient, cheap and flexible transport. After the Chancellor's work this afternoon we can be quite convinced that that transport will not be cheap. Not all of Scotland's roads are full of huge lorries carrying vast transformers, boats, propellers and so on from one part of the country to another. There are many parts of the country on which the removal of the abnormal load tax has no effect. They are still sorely affected, and their economy is threatened by the way the Government are approaching transport problems and policy.
My final point on Scotland is that the increase in the taxation of spirits


affects the people of our country more than anybody else.
We heard today a very comprehensive and able speech by the Chancellor of the Exchequer which has raised taxation more than any Budget in memory. Right hon. and hon. Members opposite cheered themselves hoarse over it. To me that was an astonishing display which I believe they will live to regret. I remember when twopence on a packet of cigarettes imposed by a Conservative Chancellor made them hoarse with rage. Today that is a fraction of a Budget which has increased taxation in a full year by £923 million—a lot for anybody to swallow. Moreover, it is set against a background of crisis not in this country alone but in the whole of the western world's monetary system.
The main missing factor in this crisis has been confidence. As far as I understood the Chancellor's aim today, the whole exercise was designed to try and win back confidence abroad in the economic direction of the country. I hope he succeeds. But when one sees the Western world's monetary system coming in danger yet again of collapse, I hope that we shall move into a recognition that economics is not only concerned with figures and that bad economics are not only a result of bad Government but a symptom also of disease and not the disease itself.
Even the issue of confidence, which the Chancellor has attacked so carefully, still depends, I think, as much on what people think of him as on what they think of his policies. But the other issue which concerns me is what I felt to be a complete lack of vision in his speech. What aim does he think our country should have in 1968 which the Budget is designed to help it achieve? I think that he set this country's aim as £500 million surplus on the balance of payments. That is a worthy aim. But what sort of response does he think that aim and the Budget in which he enshrined it will get in Britain? How will the British people respond to this kind of concept of what their lives are to be given to?
I think that we can guess their response because of the right hon. Gentleman's expressed intention, and that of the Government, to take further statutory powers to control prices and incomes and almost everything else one can think of. Medi

ocrity presents no challenge to the British people who will not stir themselves to achieve minimum goals of small-minded men. There is greatness in this country which the Government have totally failed to inspire or reach in any way. Do not let the Government congratulate themselves as they bully and drive this great nation into their small acres. It is a bad teacher who has to use the stick. The Government have failed already, will fail again and will fail not only because they have devalued the British £ but because they have devalued and under-rated the British people.

9.53 p.m.

Mr. Laurence Pavitt: In view of the little time left, I hope that the hon. Member for Aberdeenshire, East (Mr. Wolrige-Gordon) will forgive me if I do not follow him too far in the debate. I want to make a quick response to the hon. Member for Manchester, Withington (Sir R. Cary), with his very warm and human tribute to the Chancellor of the Exchequer, which struck a chord in most of us. This is one of those occasions when one warms to this place, which at other times can be very frustrating. When one hears a tribute like that of the hon. Gentleman, it strikes a spark across the Floor of the House and I want to join in his tribute to my right hon. Friend.
My right hon. Friend, of course, has not pleased all of us, and never will. But the way in which he has taken such tremendous responsibilities on his shoulders on behalf of us all is something that we on this side are very much aware of, and, in the critical comments we are likely to make in the next few days, I hope that he will bear in mind that, in the major job he has done, he has our warm appreciation. Apparently if there was anything to be touched he seems to have touched it—people who want to get married—early or late, old-age pensioners, bingo players, car drivers and the rest.
I want to concentrate on a small but important matter. I am a Co-operative M.P. I strongly objected to the Selective Employment Tax when it was brought in. I did all I could at that time to oppose it, and I must inform my right hon. Friend that I shall fight this fresh impost of an additional 50 per cent. tooth and nail. The division between production


and distribution, between goods and services is a false one and has gone too far.
We cannot divorce these things. Service once was a good thing, a word we were proud if, not something of which one was ashamed. The way that this tax operates means that it is the housewife who has to pay. As a child I remember that the initials P.B.I. were very mysterious to me and arose from the First World War. When I was old enough to know rude words I learned to understand that the P.B.I. meant the people who bore the brunt of the fight, the "Poor Bloody Infantry".
These days when it comes to the economic battle it is the P.B.H., the "Poor Bloody Housewife". She has to bear most of the increasing prices, whereas the pay packet that her husband gives her is very much the same. I welcome what my right hon. Friend said about not introducing a valued-added tax. I rejoice that that has not happened yet, because it would be a tax on food, and so far no Government of any political persuasion has made a direct tax on food. I hope it will never be imposed. S.E.T. is however an indirect tax on food. To give an example from the concern about which I know most—the Co-operative Movement—75 per cent. of the total amount of the trade done by it is in food and fuel. At the moment co-operative societies are paying £10 million on S.E.T. and this will now go up to £15 million, so that £11,500,000 will have to be directly absorbed on the basis of bread, butter, milk, tea, butchery and so on, the basic ordinary commodities that the housewife buys.
While the Movement has been able to absorb as much as possible without passing it on to prices it is inevitable that prices must now rise. I welcome my right hon. Friend's comment that he would take special measures to keep prices down, but with 3,000 different prices bearing on the Cost of Living Index, he has an almost impossible task. The moment that one talks about wages, the whole trade union movement rises up, and the moment that one talks about dividends the whole of the Confederation of British Industry rises. But when one talks about prices and the various mechanisms that we have tried to erect to deal with rises, such as in gas and electricity, then all the consumer com

mittees have about as much effect as a snowball in a baker's oven. We are just unable to mount the same kind of pressure when it comes to dealing with prices.
For that reason I very much resent this fresh impost, up to 37s. 6d. from 25s. for each person employed in the distributive trades. Apart from anything else, the anomalies are fantastic. This impost is based on the Standard Industrial Classification, which was brought forward in 1948 and revised in 1958, for an entirely different purpose to that with which S.E.T. deals.
Apart from the impact on the Cooperative Movement may I point out how badly this affects the Health Service. I am a member of the North-West Metropolitan Regional Hospital Board. Last year we paid £1,000,478 in S.E.T. and a whole band of accountants and reams of book-keeping was needed for that. At the end of that time, we got another lot of accountants to give it back again. The result is that we have a Government Department, the Ministry of Health, paying it out on the one hand and the Treasury giving it back with the other. This strikes me as bad economics, bad use of a limited labour force, and a waste of effort that could be better used in increasing exports.
In another sphere the Minister of Health has done a sterling job in trying to ease the load on the general practitioner by encouraging him to use ancillary services. With S.E.T. he is discouraged from using these, so the taxpayer pays £7,500 for a doctor to be trained and then instead of clinical medicine he is filing cards and writing letters—a job that a typist could do but she cannot be afforded because of S.E.T. I would have liked more time to develop my theme, because there are many comments that I would have liked to have made. I accept that there are benefits in the exemption of hotels in the Development Areas, but other service industries are just as important. The Co-operative Movement will vigorously oppose in every way that it can this fresh impost upon consumers, because it is the consumer who, at the end of the line, will have to pay the bill.

Debate adjourned.—[Mr. Gourlay.]

Debate to be resumed Tomorrow.

THAMES VALLEY POLICE (AMALGAMATION)

Order read for resuming adjourned debate on Question [18th March]:
That the Thames Valley Police (Amalgamation) Order 1968, a draft of which was laid before this House on 14th February, be not made—[Mr. John Hay]:—

Debate further adjourned till Tomorrow.

Orders of the Day — POLICE (SEARCH WARRANTS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Gourlay.]

10.0 p.m.

Mr. Arthur Lewis: I refer the House to a debate which took place on the 7th March, initiated by the hon. Member for Chelmsford (Mr. St. John Stevas) when he raised the case of Lady Diana Cooper and what was then termed the "drug raid". The Under-Secretary of State on that occasion made a number of statements reported in HANSARD which were not then, and are not now, in accordance with the facts. I will not go into them in detail but would refer hon. Members to columns 830, 832, 833, and perhaps more important, column 835. The Under-Secretary implied that this was an isolated case, this sort of thing did not usually occur, that the police took certain precautions and did not usually act in this matter. The hon. and learned Gentleman should have been informed by the police that there were at least four other cases, which I know of—one in my own constituency, one in Kilburn, one in Clapham, and one in the constituency of my hon. Friend the Member for Brixton (Mr. Lipton) and, indeed, there was one in the Prime Minister's constituency. None of those cases has been satisfactorily dealt with. The police have deliberately misinformed hon. Members and have obviously misinformed the Under-Secretary with regard to the evidence which has been given to the House.
I will recount what happened in Forest Gate, which is in my constituency. In this case, the person concerned was having a birthday party for his three-year old child. Without warning, the police raided his home. It was on a Sunday and these were not plain-clothes police

men. They arrived in Black Marias and there were motor-cycle police and uniformed police. The house was raided, the children were frightened, the women were searched, without women police officers being present, and the children's food was examined.
I raised this matter with the former Home Secretary at the time. It took three months to receive a reply. When I received it, the Home Secretary said he would ask the police to investigate and have a report made. Before this happened, the local Press telephoned me and said that the police had completed their investigations, had exonerated themselves and that the report would contain certain matters. I did not know anything about this and, as far as I knew, no one else did. I contacted the Home Office who confirmed they had had no report from the police.
After the Press had published reports in two newspapers and after three reporters had told me the police had given them information before the Home Office or I had received it, I was eventually informed by the Home Office that the police had made a statement that they had received an anonymous telephone call from the person who was the occupant of the house, and who had, allegedly, reported the matter. It is as if my hon. Friend the Member for Brixton telephoned the police and said, "I am Colonel Lipton. I am holding a drug party at my house tonight. Will you come round?"
That is exactly what the police did. They did not trouble to check. They did not look up the electoral register or contact the town hall to find who the person was. They made no investigations to discover whether or not he was a respectable character. They simply made the raid. They did all that I have mentioned and then they held an investigation and exonerated themselves. It is a disgusting situation.
If I picked up the telephone this minute and phoned the police, saying, "I am Mr. James Callaghan. I am having a drug party in my house. Will you please raid it?", would they go along and raid it? I see the Under-Secretary of State smiling, but that is what happened in this case. The person concerned happens to be a coloured gentleman, and I am still waiting for the promise made by the Under-Secretary when he replied to the recent


debate and said that all these sorts of cases are treated alike. In the case of Lady Diana Cooper, within 24 hours of the Press getting hold of the story, the Deputy Commissioner went along to apologise to her. My coloured constituent is still waiting for the Deputy Commissioner to apologise to him. No doubt because he is coloured, he may have to wait a little longer.

Mr. Marcus Lipton: If I may make one small correction to what my hon. Friend has said, in Lady Diana Cooper's case it was two days after the raid that a police superintendent called, and a further two days after that that the Deputy Commissioner called. My own constituent has had neither of them call yet.

Mr. Lewis: In Lady Diana Cooper's case there were gaps of two days and two days. In my constituent's case it is something nearer six months, and he is still waiting for the superintendent or the Deputy Commissioner to go round and see him. Presumably they do not know where Forest Gate is. I can supply the address, if necessary.
In the course of his speech, the Under-Secretary of State referred to his concern with the general safeguards provided for all citizens, whatever their status or social background. My hon. Friend the Member for Brixton is quite right. Those concerned in the case in Kilburn are still waiting for the superintendent or the Deputy Commissioner.
However, as regards the case in my constituency, I am not so much concerned with the raid, bad as it was, but with the fact that anyone can phone the police with such a story and have it acted upon. I am told that my constituent was advised by the police that he probably had some neighbours who did not like him and it may be that they had phoned the police to cause him trouble. He was advised to sort out who his neighbours were.
This sort of thing can be extremely damaging. It would have been just the same if my constituent had been waiting to get a job. If someone wants to do harm to a man in that position, he has only to phone the police to say that there is a drug party going on at his house, and the police will raid it. There is an old saying that mud sticks. Another says that

there is no smoke without fire. The police come along in Black Marias and on motor-cycles. In this case, they frightened poor little children out of their lives. Uniformed police jumped all over the garden and, as I have said, searched the women. Obviously, the whole neighbourhood soon got to know about it. One can imagine how it would quickly come to the ears of any potential employer.
It could happen that a man's neighbours wanted to get their own back after having had an argument. All that they have to do is phone the police and say, "Will you go along to such and such an address. They are having a drug party there", or it may he that the police are told that there is some stolen property there.
I suggest that the police should be told, first, that they should not go along to a magistrate and tell him that they want a warrant, inferring that they have, as was said here, good grounds for it. It was said that there was one case where the officer misled the magistrate. I can quote five cases where this has happened. I say that the police, when they go to a magistrate to get a warrant, should put into writing their grounds for requesting it and the evidence upon which it is based.
Equally, when they go along in response to an anonymous phone call, they should check with the local authority on the character background of the complainant to see whether he is a decent person or has a criminal record. There are a thousand and one ways in which they can do that.
When they go along to the premises concerned, I suggest they should be discreet. I suggest plain clothes policemen in an ordinary car. They should knock on the door in a decent manner and say, "Mr. Taverne, may we come in and speak to you? We have a warrant and we would like to look around to see what is happening." If there is nothing untoward they can go away without letting all his neighbours and friends know what is happening.
I shall have to give way very shortly, because my hon. Friend the Member for Brixton wishes to mention the case of a dear old lady of 67. This can be very a frightening experience.
I deeply resent the fact that the police should give their own report exonerating


themselves to the Press before giving it to me. I am asked to divulge the names of the Press reporters before we can have another inquiry conducted by the same police. if the police never divulged this report to the Press and if, as is the case here, the police were the only ones who had the report—neither the Under-Secretary nor I had it—who gave it to the Press reporters? This question has never been answered. These Press reporters have told me that it was definitely the police who gave them the report. I ask the Under-Secretary to tell me who gave the report, in which the police investigating their own conduct exonerated themselves, to the local Press enabling them to publish it—copies of which I have sent to the Under-Secretary—weeks before he even had the decency to send me an answer to my communication.

10.13 p.m.

Mr. Marcus Lipton: I will not take very long in outlining the case that I have to present, because we are all anxious to hear what reply the Under-Secretary will make to the serious allegations which have been addressed to him by my hon. Friend the Member for West Ham. North (Mr. Arthur Lewis).
We all know only too well what happened in the case of Lady Diana Cooper and the very speedy apologies which were tendered to her by high-ranking police officers.
My hon. Friend the Member for West Ham, North has referred to the case of Mr. and Mrs. George of Kilburn. Nine weeks ago now, their home was raided by the police who were allegedly looking for drugs. Again, nothing was found. Mr. George, a 23 years' old transport contractor, and his wife are still waiting for an explanation or an apology from the Home Office. Why have they had to wait so long? The official reply in that case is:
Because Mr. George has made no official complaint. Press publicity does not constitute an official complaint. If Mr. George makes a complaint it will be investigated and he will be informed of the outcome. He might, or might not, get an apology. It is within the Commissioner's discretion to decide the form of reply.
If the Home Office argument is based on that proposition, it is doubly at fault, because the police said that Lady Diana

made an official complaint, hence the apology. According to Press reports, Lady Diana says that she made no formal complaint. Her words, according to the Press report that I have seen, were:
Obviously I got an apology only because I was well known. I had not contacted the police. I suppose it was lucky that the police picked on me. Otherwise there might not have been such big publicity and these outrageous actions would never have been brought into question.
In the case of my constituent, Mrs. Callis, an old lady of 67, her house was searched on 4th January last. I have not yet been able to ascertain on what basis the search warrant was granted in that particular case, but I believe it was connected with some burglary. I do not know whether Mrs. Callis was suspected of actually having burgled somewhere or of being in possession of some stolen goods, but there again, despite the most vigorous complaints addressed to the police by her son, no reply has yet been forthcoming.
This case was brought to my attention by my constituent, who asked very rightly why such speedy action was taken in the case of Lady Diana Cooper whilst in the case of his mother nothing had been done despite urgent requests for some kind of explanation. I wrote to the Home Office on 11th March. I do not expect a reply from them as quickly as all this, but I hope a speedy explanation will be forthcoming. I would have known nothing about this case but for the publicity which attended the case of Lady Diana Cooper and which prompted my constituent to come and see me about this matter.
I hope that I shall be getting a satisfactory reply from the Home Office at an early date and that in the meantime my hon. and learned Friend will be able to give some kind of explanation for what appears to be a sequence of unfortunate episodes in which it appears that the police have acted, have taken out search warrants, or have obtained search warrants from magistrates without reasonable cause or justification.

10.17 p.m.

The Under-Secretary of State for the Home Department (Mr. Dick Taverne): As my hon. Friend the Member for Brixton (Mr. Lipton) has very fairly


stated, he does not expect a reply yet to his query about the case of his constituent, Mrs. Callis, and I am not in a position at the moment to deal with that case. However, I would like to refer to the two specific cases that have been mentioned by my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis).
First, may I go back to the case of Lady Diana Cooper. It is true that a specific apology was given by the Deputy Commissioner, but I do not think that my hon. Friend can really make out a case that the police act in an unjustified manner only against those who are coloured when in fact it was admitted on the last occasion on which this question arose in the House that they had acted in an unjustified manner against Lady Diana Cooper. On that occasion I said that the reason they had acted in an unjustified manner was that they had acted on an anonymous informant without making any particular effort to check up, and I stand by what I said on that occasion, that efforts should be made by the police in one way or another to corroborate anonymous information. Obviously they cannot neglect it altogether—I am sure my hon. Friend recognises that—but the question is how they can corroborate such information, and in many cases this is extremely difficult.
Some of the actions my hon. Friend has suggested would undoubtedly take time, and when one deals with drug cases the police must act speedily because the time factor is particularly important. I then said that the kind of verification which the police should and ought to go for is keeping observation on the premises, making inquiries in the neighbourhood where this can be done, through known informants where possible, and checking records where they can be checked. Nevertheless, even when such attempts are made to try to obtain some corroborative information, undoubtedly cases will arise in which, when the raid is made or the search warrant is given, nothing is found. I fully understand the resentment which is felt by people when their houses are unjustly searched, unjustly in the sense that there is no foundation for the charge, but it would clearly be impossible for the police to be resticted in such a way that they could never act on what at the time seemed

reasonable suspicion, even if subsequently nothing is found. Again, the question whether plain-clothes men are available, all depends on the time factor.
I want to come to the two specific cases which my hon. Friend mentioned, and perhaps I might deal first with the case of Mr. and Mrs. George, because I can deal with it rather more shortly.
In January the police received information from a known informant, not from an anonymous one, and, moreover, an informant whose information had been relied on in the past, that a group of people were trafficking in cannabis and using it. Further inquiries were made to check the information, and what further information became available tended to support it.
As a result, a number of search warrants were applied for and issued, and seven of these were executed on the basis of the same information. At five of the seven addresses cannabis was found, and people were arrested and charged. Mr. George's address was one of the two at which nothing was found, and after the search proved abortive the officers concerned apologised to Mr. George and his wife for the disturbance.
The next is the case with which my hon. Friend mainly dealt, that of Mr. Olujimi. In this case, as my hon. Friend rightly said, information was received from someone who described himself as Mr. Olujimi that a drug party was taking place at 3 Crosby Road, Forest Gate. The sergeant in the case decided that this was nothing much to go on, but decided that he should watch the premises before making up his mind whether to apply for a search warrant. While this was being done, an unusual number of people were seen entering and leaving that house. He came to the conclusion that the information given him by telephone could be authentic. He made an application to a magistrate for a search warrant, and it was granted.
Following that, six officers went to the house. They showed the warrant to the occupier. They explained the reasons for the visit, but it soon became obvious that the information was incorrect, because a children's party was in progress, and the search was discontinued. The officer in charge apologised to Mr. Olujimi, and apologised again later when


Mr. Olujimi went to the police station on the same day. At that time Mr. Olujimi appeared to accept the apology.
He made a number of charges which he later withdrew. All the witnesses who were seen by the police agreed that the police officers were polite throughout the visit. It was alleged that the children were frightened. In fact, the other witnesses interviewed said, that, far from being frightened, the children were laughing and playing. Other witnesses were interviewed by the senior police officer. Mr. Olujimi withdrew the allegation he had made earlier that the police went round tasting food, and again there was no substantiation for the allegation that male police officers had searched women in an obscene way. When Mr. Olujimi was seen again later he appeared to accept the apology.
My hon. Friend then had a long correspondence with the previous Home Secretary, in which the reasons for the delay in answering was explained, and the question came up about the leakage to the Press. I sympathise with my hon. Friend. It is undoubtedly much to be regretted if information which he has not had, and which the Home Secretary has not had, finds its way to the Press. But the difficulty here is that there is no way of finding out who was the police officer who supplied the information, without finding out from the members of the Press who got it, and I must say that when my hon. Friend was approached by the Home Secretary and asked whether he would have any objection to the members of the Press being asked who the police officer was he objected to this and said that he did not wish the Press to be pressed any further. In his correspondence, he expressed general dissatisfaction coupled with astonishment that the police had not seen fit to accept that some policemen must have given the information to the Press, but my hon. Friend did not give the name of the police officer alleged to have given the information, and I do not think that he knows who the officer is. He would not let us inquire of the journalists either. In these circumstances, it is very difficult to discover or to try to discover who the police officer was—

Mr. Arthur Lewis: I did not ask for the name of the police officer and I am not asking for it now. It seems that the

police exonerated themselves—this is their exoneration—and they then held an inquiry into their own conduct and exonerated themselves again. They are the only ones with the report. Neither I nor my hon. and learned Friend has it. Three Press reporters—my hon. and learned Friend has the names—say that the police gave it to them. Who else could have given it if it was not the police?

Mr. Taverne: The least which one might do is approach the three Press men to find out who supplied them with the information, but my hon. Friend was not agreeable to this course.
However, this case, the George case and possibly the case raised by my hon. Friend the Member for Brixton all once again raised the difficult issue of the police acting on information. There was an attempt in the Olujimi case to try to confirm and inquiries were made in the case of Mr. and Mrs. George. Certainly, in the former case, five of the seven warrants executed were based on good information. The fact that I have not specifically mentioned, in the case of Mr. and Mrs. George, that they were innocent, by the way, does not mean that I have any suspicions to the contrary. All I am saying is that, in this case, the police were acting on information which, five times out of seven, was proved well-founded.
The question was raised last time, and my hon. Friend has raised it again, of whether the whole procedure for applying for warrants to the magistrates should not be reviewed. This point was also raised in an editorial in The Times. The House might wish to know that the journal Justice of the Peace recently commented on this procedure. It did not agree with The Times or object to the general procedure followed and said:
It would be a pity if the police now went to the other extreme and never applied in such cases—it was up to the magistrate whether he considered an application reasonable.
I reaffirm that the police should try to confirm anonymous information. It is not always possible for them to get completely satisfactory corroboration, and it is inevitable, in some cases, even where the information seems to be confirmed, that they will act wrongly, but we must keep a balance between the two, to see


that people are not prejudiced and do no. have their premises wrongly searched and, on the other hand, do not tie the hands of the police so much that they cannot carry out searches which the criminal law in general demands.

Mr. Lipton: May I take it, then, that in all cases where a search warrant is employed but nothing is found, some kind of apology may usually be expected?

Mr. Taverne: In all the cases which I have come across where nothing has been found, an apology has been offered. I do not know every case, and I would of course look into any instance where this has not been so.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.